Welcome to What Matters Now, a weekly podcast exploration into one key issue shaping Israel and the Jewish world — right now.
On Sunday, Prime Minister Benjamin Netanyahu opened his cabinet meeting with an announcement that his government will draft a decision to establish a new ministerial committee — that he will head.
In his remarks, Netanyahu stated, “The fight against the cost of living tops our government’s list of national priorities. We will take determined and strong action to lower prices in all areas.”
Our What Matters Now guest this week points out that this new Netanyahu-led committee is perhaps the fifth such task force the government has established to study the cost of living since 2011.
But lawyer and “people’s lobbyist” Rachel Gur is ready to take up the fight to lower Israel’s outlandishly inflated prices.
Gur moved to Israel from the United States at age 17 and served in the IDF Spokesperson’s Unit. After demobbing, she earned an L.L.B. and B.A. in political science from the Interdisciplinary Center Herzliya and an L.L.M. in Legal Theory from New York University Law School. (She also married The Times of Israel’s senior analyst Haviv Rettig Gur.)
Like any reputable lobbyist, she knows how to walk the halls of power: From 2011 until a few years ago, Gur served in senior positions in the Israeli government.
Today the Director of Public Policy for Lobby 99, Gur is an expert in the fields of Israeli legislation, regulation, and public policy.
But what makes Lobby 99 different from other pressure groups is that we, the people, set the agenda.
This week, as the cost of living is again on the cabinet’s agenda, we ask Rachel Gur, what matters now.
The following transcript has been lightly edited.
The Times of Israel: Rachel, thank you so much for joining me today in the Nomi Studios in Jerusalem.
Rachel Gur: It’s a pleasure. Thank you for having me.
We are going to talk about something that is near and dear to really every single person’s heart here, and it is the cost of living. And this week, in fact, our Prime Minister, Benjamin Netanyahu, included in his Cabinet meeting a lot about the cost of living. So I ask you, Rachel, in this week, what matters now?
What matters now is that we pay a lot of money for basic goods: food, toiletries, et cetera. And it doesn’t have to be this way. The reason we’re paying a lot of money is that there are a few people who are making a lot of money off of us. And really, the situation, it’s unnecessary. And perhaps the most important thing is that it’s changeable. We can change the situation. Life here doesn’t have to be as expensive as it currently is.
You are part of Lobby 99, and, just anecdotally this week, after the prime minister made his remarks, in our extended family WhatsApp group, the patriarch shared a video about the high cost of living here. Very annoying, as always. And one of his sons said, hey, everyone should join up to Lobby 99 because they’re the only people in this country who are trying to do something about it. So explain to our listeners, first of all, what is Lobby 99?
With pleasure. Lobby 99 is the public lobby. It was founded eight years ago based on the very simple principle that in order to push decisions through government, specifically decisions that affect economic policy or to put it more simply, decisions that affect how much money we get, who gets the money, when they get the money, and how, you need lobbyists.
Lobbying today is a very established profession. In the same way that you need an attorney if you go to court, and if you open a business, you should have an accountant on staff, so too, if the public, if the average citizen wants to affect how decisions are being made in the Knesset and in the government, they need a lobbyist.
What’s the problem? Lobbying is expensive. Lobbyists make a lot of money because they have very unique expertise. Not me, unfortunately, but commercial lobbyists. And therefore the people or the organizations that have the ability to retain the services of lobbyists are generally large corporations, big megacorporations, specifically.
We’re talking about the cost of living. We’re talking about big food conglomerates, right? Big food and toiletry conglomerates. And the public — although the public is, at least on paper, the largest interest group possible, the public is everybody — the public is disparate. Is disorganized. The public can’t hire people directly.
And so in 2015, I actually joined in 2020, but in 2015, the idea started that if we could collect small amounts of money, if we could get a lot of people to give a little bit, then we could change the way policy was made in Israel and we could ensure that not only the tycoons or the large companies would have lobbyists and would have all the benefits lobbyists give them, as in kind of a backdoor to the members of Knesset and government, but the public would also have that same representation.
We started with an initial crowdfunding project. It lasted for four months. It was successful. And from there, we have grown to an organization of 15 people and we still operate using that original model and we are funded entirely by the public. We have, as of this morning, 10,682 members, just average Israelis, people like me and you. The average donation is 37 shekels. So we’re not talking about a lot of money a month. And in fact, you can donate one time but that doesn’t buy you membership because, much more important than the money is the buy-in, is the idea that I am representing you when I go and talk to an MK.
I am representing 10,000 people, 10,000 households here in Israel, and we are in a small country — that has a lot, a lot of power and a lot, a lot of sway.
So let’s talk about, for example, all the things that make up my very, very average life. I have to say, of course, I may have a few more kids than other people, but we are not fancy folk. We drive a 2003 Honda and a 2006 Toyota. But I’ve noticed in the past several years that my bills are just going up, up and up, especially at the grocery store, but not only. So let’s take my very average life and tell me why this is happening.
So first of all, there are trends that are above and beyond the Israeli economy. Although we always like to believe we are the focus of the world, there are, we almost admit, global trends and we are experiencing a global trend of inflation as well as the devaluation of the shekel. And so yes, those issues exist and those issues affect our bills on a day-to-day basis.
But I think what’s more interesting and perhaps more pertinent to why it is expensive here is the fact that the Israeli economy, or at least the Israeli grocery store, has a “special magic” and it really doesn’t matter what’s going on in the world. The price of the freighters, of shipping food, they can go up, they can go down. The price of raw goods, raw food substances, they can go up and go down. The value of the shekel can go up and go down. And somehow the prices here only move in one direction. They always go up!
So if the global trend “favors us,” the shekel becomes stronger. The travel and transport costs go down. Still, the prices here are high, and they always become higher. And the reason for that, in our opinion, is simply because there isn’t enough competition in the food sector. And when I say food, I’m talking about not just food, but also toiletries, all the things that you buy at a supermarket or super-pharm.
And actually, Israel is unique in many ways. One of the ways is that our food economy is considered the most concentrated in the Western world. We have the least amount of competition of any Western country when it comes to the things you buy at the grocery store, which are obviously very deeply tied to the cost of living. There are about five or six companies that control about 45%, almost half of the food market here in Israel. And that is simply an unprecedented situation anywhere else in the developed world.
Is this because Israel has traditionally been somewhat of an island? We don’t exactly have great relations with our neighbors. Or how did this develop?
So it’s popular to say that we are an island economy and that we’re a small country and this is the way it is. This is our fate — to pay exorbitant prices at the grocery store. But if you compare us to other island economies, like, for example, New Zealand.
Right, which is an island.
It’s an actual island, yes, and it has a population even smaller than our own. You’ll see, the prices there are lower, even though obviously it takes more time to ship there. And what’s even more interesting is that often Israeli companies for example, Diplomat, which is one of the major importers of food goods and toiletries — they import a lot of things that you would know: Jacob’s coffee, Starkist tuna, all of the products of Gillette, the razors, the creams, and I could go on and on and on and on. They have a very, very long list of imports. They don’t operate just in Israel. They actually operate also in Cyprus, in Georgia, the country, not the state, in South Africa, and in New Zealand.
And in each of those places, they charge less for the same goods. Their profits here in Israel are about double the profits in, for example, New Zealand. And what that tells us is even though we are an island economy, yes, we can’t transfer goods, via land borders for the most part — it is getting a little bit better. We do actually buy a lot of fruits and vegetables from the Palestinian Authority.
But here we’re talking about mostly imported goods. And so despite the fact that we are, let’s say, an “island economy,” if you compare us to another island economy like New Zealand, you’ll see that we are still much more expensive. And we’re even much more expensive when the company selling the products is an Israeli company. Okay?
That’s extremely irritating.
It is extremely irritating. Remember that next time you buy Starkist tuna.
Which I don’t buy because I’m a simple person. I only buy store brands as much as possible. But they’re really expensive, too. How is that?
Because in the end, well, I mean, obviously every company is in it to make money. And that’s a good thing, right? Companies should make money for themselves, for their shareholders and whatnot.
But when you don’t have enough competition, what basically happens is you have two or three companies in Israel in almost any issue or any product that you choose. For example, let’s take coffee, okay? There are two or three companies Osem, Strauss and Diplomat, okay? Osem and Stauss are Israeli companies. Well, Osem is actually a wholly-owned subsidiary of Nestle. So it once was an Israeli company. It no longer is. Strauss-Elite is an Israeli company. Diplomat, one of the major importers.
So between the three of them, they control 90% of the coffee that you buy in the store. Now, when there are only two or three actors — and unfortunately, it’s not just true of coffee. I mean, we can talk about air conditioning units, we can talk about diapers, we can talk about tampons. We can talk about almost anything that you pull out of the basket in the supermarket and we can find that the same thing is true. We have two or three actors that control 80% to 90% of the market.
And when there are so few people, what they can do is basically just artificially keep the prices high, right? Why bother to low the prices? It works well for everybody. And then what happens is, for example, let’s say you go to Rami Levi, or to Shufersal and you buy their house brand. But that house brand is pegged to be just slightly cheaper than the more well-known brands — the Osem, the Diplomat or whatever. So as Osem and Diplomat raise their prices, the house brand is going to go up too, right? It’s all going to go steadily up. And in fact, just yesterday a report came out about the fact that Shufersal, which is the largest Israeli supermarket chain that has a monopolistic share of almost 40% of the market, is now raising the prices of their house brand. And why are they doing that? Because in the last two weeks, we’ve seen about 15 or 16 major food importers and suppliers, both the manufacturers and importers, raise their prices and once the first one goes, the rest will follow.
Okay, we are going to continue to get irritated and then we’re going to talk about solutions.
Let’s turn to the field of banking. When I came here 24 years ago, I remember talking to Bank Hapolim and after I got my first statement, I said to them, I noticed that you’re deducting more in fees than the interest I’m getting on my account. And I was laughed at, of course, and told that’s how it is here.
That’s right. So, yes, that is how it is here. Many of our listeners might be surprised that in Israel there is no such thing as “free banking.” Banking costs money, even if it is just pushing a button on the computer and moving your money from your savings account to your checking account. That will cost you money. And actually, in this case, consumer awareness has made a big, big, big difference. It’s been a campaign of which we at Lobby 99 are a part of and other organizations are part of to make people aware of the fact that free banking is a possibility.
You and I know that because we grew up in the US. But the average Israeli? It’s inconceivable, right? If you’ve never seen it, you can’t imagine it. And there’s become a big campaign to encourage people to call the bank and to demand free banking or they’re switching. And so here actually the fees are slowly, slowly a little bit going down. But part of the problem is that many of the things that Israeli banks charge for, other banks simply don’t charge for.
There are the things you see, like the shekel and a half that you see for this transfer or the two shekels for taking out money. But that’s the small change. The big money, the big loss to you, the consumer, comes from the fact, for example, you can in Israel, if you are in the “pluse,” as we say, if you have money in your checking account as opposed to being an overdraft, you can’t earn interest on that money. If you’re in overdraft, they will charge you a lot of interest — 15%, 16% 17%! Depends on how much the overdraft is and what exactly you’ve negotiated with the bank.
But let’s say you have 20,000 shekels sitting there. You are the responsible fiscally conservative citizen and you actually have money in the bank. You won’t earn any interest on that. Now, why is that frustrating?
Because they’re using my money the whole time.
Correct. Not only are they using your money to invest, they actually have an agreement with the Bank of Israel. And every night, all the money that is in all of our accounts actually is technically placed in a savings plan, a nightly savings plan at the Bank of Israel. And the commercial banks receive interest from the Bank of Israel.
As we know, the interest rates currently are very high, and they receive whatever it is, four, five, 6% interest. Because they deposit your money in the Bank of Israel overnight. It’s a 24-hour cycle, and they receive interest on that. But that interest doesn’t roll over to you. You don’t get any interest for having money in the bank, but the bank gets interest for having your money in their bank.
And that’s just one example, and we can find many, many more examples. And the problem here, again, not to sound like a broken record, is competition. You have to remember that 80% of the market in Israel is controlled by two parties, right? There’s Bank Hapoalim and Bank Leumi, and they control the majority of the share.
Now, there are all sorts of other smaller banks that are trying to move in. Mizrahi is a very big bank, Discount, there’s Bank Yahav, which deals with government employees. And there’s this new social project bank. But in the end, you still have the same problem you have in the food market. You have a few parties who are controlling your life, basically, to put it simply, who are controlling your bank account. And where there is no competition, there is no interest to consider or to try and meet the needs of the customer. It’s simply not necessary. Because the customer is stuck.
I’m also stuck with, as I said, a 2003 Honda and a 2006 Toyota. And we’re trying to replace these antiques. But the prices of even secondhand vehicles are incredibly, incredibly high. What’s going on here?
So, the prices of cars in Israel are very high. It’s a product of a lot of things. For one, we are charged an exorbitant amount of tax on cars. Cars are taxed at 83% of their value, as in if the car cost 100,000 shekels in Israel, you need to pay 183,000 shekels in order to buy it because of that very high tax. Why is that a very high tax? It’s a long, historic story, but it’s a big money-maker for the government. That’s one of the reasons.
Another reason is, again, the lack of competition. There are four companies that control the entire car import industry, and you might see all different brands. Thankfully, the variety has increased and there are probably about 100 different car brands that are currently being imported to Israel. Israel doesn’t manufacture any cars, but those 100-something brands are actually being controlled by four or five companies. So each company controls a number of brands.
And what was interesting was to see it now with the electric cars, because those are new cars. That’s something that we thought would shake up the market. And it’s the same four or five large major companies that are also winning all of the licenses and the contracts to import electric cars, ensuring that, once again, electric cars, rather than being a force for creating competition in the market, will be a force for increasing their very respectable profits in the field.
And another reason that they are expensive is that car parts in Israel are very expensive. I mean, you go to the garage and you have no idea how much you’re going to pay. You can come in with something simple, and you can leave with a bill for thousands of shekels. Unless you’re a mechanic yourself, you really don’t know why or what or this and that. And part of the reason that you don’t know how much that check should cost, and this is an issue that we’re actually going to get into, hopefully, in the next few months, is because, for example, in the US, or in other places, there is a public directory of car parts. And you could know, generally speaking, how much a car part should cost. Here in Israel, it’s been blocked by all the major car importers.
The car importers generally also own the garages, and they own the leasing companies. They own the whole food chain, so to speak. And they have ensured — they’ve blocked it time and time again — initiatives of the Transportation Ministry and of the [Finance] Ministry to make a similar kind of guide public.
So when you go into the garage and they tell you that you have to change the carburetor. If you lived somewhere else, you could then type in “carburetor” and find out. The carburetor is supposed to cost, let’s say, between $100 and $200. In Israel, no such thing exists. And it doesn’t exist intentionally because the less you know, the easier it is to charge you more.
So we’ve talked about things that make our blood pound. Let’s talk about some ways that we can solve these issues if we work together, as you said, as a unit, as a public. So let’s take food to begin with. You mentioned the price of diapers and my oldest son is 19, my youngest is a year and eight months. And actually, the price of diapers has not changed at all between my firstborn and my lastborn. And that’s one thing I’ve noted and thought was really strange. So it can be done.
It can be done. Diapers here are more expensive than, for example, in the US or in Europe. But I agree with you. The delta here is not as high as you would think, but it could be lower. We could easily find ways of improving. In fact, there used to be up until about six months ago, it used to be that Israel had a unique standard for diapers. Diapers that were produced in the EU or America couldn’t be imported to Israel unless they were adapted to the Israeli economy or to the Israeli baby’s butt for specific purposes. And the reason for that was that it was essentially a protectionist measure.
The majority of diapers, the company that created, sells Huggies — and not only do they sell Huggies, they actually sell most of the supermarket brands as well. They’re all created by Hugla, which is an Israeli company that merged with Kimberly Clark, an international conglomerate. And they control 60% to 70% of the market share. After that, you get Pampers, which is owned by Diplomat. Also not incredibly interested in competition. And the only independent so-called company for diapers is Babysitter, which is probably what you buy. And they are actually a tad cheaper. But, yes, up until about six months ago, it was nullified, that kind of unique standard.
The work is not done. I would very much like to see us be able to import diapers from anywhere in the Western world. It’s a low-risk item. You don’t eat it. Right. It doesn’t go into your body. But what we did is actually we adopted the Australian standard for diapers, which is a step forward, but not sufficient. It’s a work in progress.
Okay, but there is work that’s happening. Where else are we seeing any kind of change or possibility for change?
So, one thing that’s created a lot of change is the ability to order things. The ability of Israelis to order directly from abroad has changed the economy. In 2010, Israelis ordered about eight to 10 million packages per year. By 2019, pre-Corona, they were ordering between 60 and 70 million packages per year. And what they’re ordering, contrary to kind of popular opinion, is not little tiki lanterns for your small Tel Aviv apartment.
What they’re ordering, for the most part, is clothes, shoes, and toiletries. They’re ordering basic items. And that has created what we call economic pressure that has driven down prices here in Israel. And maybe you remember from your firstborn to now that baby clothes used to be much, much more expensive here, that they really used to be astronomic. They’re still expensive, there’s no question. But it’s gotten much better. And one of the reasons it’s gotten much better is that baby clothes specifically are something people plan ahead for. Generally speaking, you know you’re going to have a baby and you buy those clothes in advance.
The same is true of costumes for Purim. The same is true, for example, of electric toothbrushes — all those things have become cheaper. A costume that used to cost about NIS 200 today costs NIS 50. It’s the same costume, the same thing for the electric toothbrushes.
Where we haven’t seen that kind of that economic pressure to push down prices is things that people don’t plan ahead for: deodorants, razors, soap. You don’t think, I’m going to need in two months, a package of deodorant. Let me order it now. You just run out of deodorant and you drive to the mall, right, or to the local supermarket, and you buy it. And therefore we see a real differentiation. So that’s one of the things that has helped solve the issues.
Another issue that we’ve pushed through is a very large import reform that now finally come into effect. It started in June of last year, and the last section of it has now become into effect just a few months ago in April. And what it does is lessen the requirement to have all these unique standards like we talked about the diapers, right? So that was true of hundreds, about 700, 800 items, from rice and oil and car seats, tampons, condoms. I mean, it was glasses, bicycles, you name it. We had a unique Israeli standard for it. And those have slowly, agonizingly been cut away. And we have adapted the Israeli standard to, generally speaking, the European standard. And hopefully, hopefully we know that that has lessened the cost, what it cost the importers to bring the goods here hasn’t yet rolled over to the customer, but we’re still in the infancy. I am hopeful that that will indeed lower the cost of things that we buy here.
And the last problem, as we said, we said, is competition. In the end, you can streamline regulation, but the amount of things you’re going to be able to order from Amazon in the under $75 cap and bring it here in a little box is limited.
And even if we become the most regulation-friendly economy in the world, prices still aren’t going to drop unless there’s more competition. Because there simply won’t be an interest [to lower the prices].
In fact, one of the known secrets of the manufacturing world is that they have what’s called the “Israeli premium.” Israelis make relatively high salaries relative to the developed world, we have a very high birth rate, and we are very good consumers, as in we consume a lot. So basically, we’re consumers who create more consumers. And that’s phenomenal if you’re manufacturing basic goods. And those companies, for example, Procter and Gamble or Palmolive, Colgate, who make most of the things we buy in a supermarket, they know that Israelis are used to paying more money and so they, from the get-go, even before it gets to the Israeli importer, they already price the goods to the Israeli market at a higher price.
And how do we know they price them at a higher price? Because when they sign distribution agreements with other countries in this area, for example, with their Polish supplier, part of that contract says, you may not sell to Israel. It’s the same deodorant, it’s the same Gillette razor, it’s the same Colgate toothpaste. That’s exactly the same item. It came out of the same manufacturing plant with the same safety standards. But it’s being sold for a dollar in Eastern Europe, and it’s being sold for $4 here in Israel.
And what do they say? They say to, let’s say, the Polish supplier, you are not allowed to sell your surplus to the Israeli market. Because the Israelis, they’re like the golden goose, right? They pay so much, and they buy so much, and we don’t want anyone to ruin this party. And if you sell to the Israelis, then we will stop selling to you.
Now, for example, that sort of activity is illegal in Europe, right? The EU decided when all those countries came together that, for example, while there are differential costs within Europe — obviously, you can charge more for that same tube of toothpaste in Paris than you can charge in an Eastern European economy. But what the EU said was if you sell to Europe, you cannot tell your European distributors that they are not allowed to sell outside of their state, i.e., you can sell your Colgate toothpaste for $2 in Paris and for $1 in Poland, but you can’t tell your Polish distributor that he’s not allowed to take his surplus supplies and bring them to Paris and sell them there for a $1.50. That’s not the way it works.
We, as Europeans, are a bloc. It’s called geo-blocing. And we are a bloc and you have to sell. You can’t intervene within the internal commerce of our bloc. And we in Israel are trying very much, it’s one of the initiatives that the Lobby is spearheading, that essentially we join — not the European Union, that is not going to happen — but that we join the EU geo-bloc. We say to companies, if you want to operate in Israel, you cannot include a stipulation in the contracts that you have with distributors in adjacent areas, be it North Africa or Europe or in the Mediterranean Basin that’s more or less within the area.
We’re done. We’re tired of being suckers. We’re tired of the fact that you charge us 20, 30% more because you can. And so, yes, I think if there’s nothing else that our readers remember from this podcast, it’s that we can affect the cost of living. It is an eminently solvable problem. There are many problems, specifically in Israel that are, at least to my knowledge, unsolvable. But this is a solvable one.
There are specific applicable policy changes that can be made, that have been made, that have been done in other countries. We don’t need to reinvent the wheel. And that could, in the long term, and even in the not-so-long term, in the two-, three-year range, they could drastically lower the amount of money we have to pay the supermarket and in general, every week, every month.
So exciting. I want to ask you before we close, Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich have come up with their own plan for creating a more equitable cost of living. First of all, tell us a little bit about the plan and then what you think of it.
I actually haven’t seen too many details, I have to say that. And the devil is in the details, as they say. There was a very comprehensive plan that was supposed to be part of the Budget Law. What it said was basically they would start breaking up these big import monopolies and would stipulate that these companies had to choose. They could either work with one really large company like Diplomat works with Procter and Gamble and all these little small companies. But they can’t work with also the small, also the medium, also the large. You can’t control the whole supermarket.
And it’s a drastic reform. It is intervention in the free market, which is something I am always hesitant about. I think most people are, but here, you know, there was precedence. A similar reform had happened in the banking sector when the credit card companies and the banks were separated. Remember, the credit card company used to be owned by the bank, and the bank both controlled your bank account and your credit card. So today they’re separated, and that has increased competition. And you can find other examples of kind of similar active attempts to create competition by deconstructing the concentrated elements of the economy.
And it was actually written, it was in the bill. And at some point between 2:00 a.m. and 5:00 a.m., it disappeared. On the night that the budget was being debated in the cabinet, in the government. It went in. It was part of the big document. It’s like 150 pages, almost 200 pages. And this particular paragraph was in at the beginning of the night. And by morning, when they declared that the budget had been voted, it was gone.
And in lieu of that reform, there was a commitment to create a committee, which is indeed what was created and what the prime minister spoke about. And that committee will study the situation and will give its recommendations by the first of December. And I understand that you don’t want to be too hasty, especially when you are making big reforms, but this is going to be the fourth or fifth committee since the major cost of living protests in 2011. And it begs a question if this is indeed an attempt to push off a major reform in order to think about it more deeply, or if it’s simply an attempt to push off a major reform because it’s inconvenient.
Time will tell. Rachel, thank you so much for joining me today.
It was a pleasure. Thank you so much.
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