Israelis Protest the High Cost of Living - And Prevail


As the world watches the uprising in the Arab world, another popular revolt, albeit of a different nature, is taking place in Israel.

What's got Israelis in an uproar? The same thing that raises the ire of many average American citizens: the high cost of living. Israelis want affordable housing, food, gas, goods, and services. Or, as they put it, social justice.

Blame the Cottage Cheese

It all started back in June, when Israelis joined forces on Facebook to lower the price of cottage cheese. Israelis love their cottage cheese. Consumers boycotted the product for a few weeks. Eventually, the boycott worked and the dairies dropped the prices of cottage cheese and other products.

As it turns out, cottage cheese was but a symptom of a much larger problem, and just the beginning of huge expression of popular dissent over the regulation issues that have led to prohibitively high costs in the country.

During the next month, many students and young middle-class Israelis protested high rents and housing prices by moving into tent camps they raised in many of Israel's major cities, including Tel-Aviv and Jerusalem. They also organized several large peaceful demonstrations.

Other than affordable housing, they want the government to change the system in which a few tycoons and families have a stranglehold over the Israeli market. They want to see more competition and regulation.

Tycoons in Control

The Israeli market has one of the tightest concentrations of corporate and economic power in the Western world. Ten families control 160 Israeli public companies, the Bank of Israel found. About 16 tycoons, families, and conglomerates control half the market, often through a pyramid structure, according to Israeli parliament findings.

These controlling families have their tentacles in everything from financial services to media to bread. It's a thinly veiled oligopoly. As a result, Israelis pay much more for goods and services than other developed nations and have one of the largest gaps between rich and poor among industrialized countries.

The cottage cheese issue is a good example of how this concentration of power hurts the people.

There are just three dairies that control the market, and they've been hiking prices for a while, enjoying the protection of the high tariffs imposed on imported dairy products. In fact, those same dairies also export their products to Europe and the U.S. But foreign customers pay 50% less than Israelis pay for the cottage cheese made in their own backyard, which is more than odd considering the cost of transportation.

Lowering Prices One Boycott at a Time

Seeing as the government isn't doing enough to protect the market from oligopolies, the consumers took it upon themselves. On the hot seat after cottage cheese was Israel's largest supermarket chain, Nochi Dankner's Shufersal (or Super-Sol), whose market share of bar-coded foodstuffs is a staggering 37%.

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The demonstrators demanded a substantial reduction in prices at the chain. About half the public said they would join in the boycott if it went ahead. Shufersal's management negotiated with the protesters and has agreed to a 20% cut on 30 leading food products, including bread, milk, eggs, and baby formula, for at least a year. Another large supermarket chain, Mega, controlled by Blue Square (BSI), immediately followed suit.

Now the protesters are organizing a million-person march for Saturday -- no small feat for Israel's population of roughly 7 million. After that, they will begin the so-called 10 plagues initiative, which will target one controlling family/tycoon at a time. The first target is Yitzhak Tshuva and his Delek (DK) gas stations.

Does Social Protest Work?

Last month, Prime Minister Netanyahu promised he would look into oligopolies in the market. But with many of the interested parties also holding positions in the government and the Israeli parliament, and with strong lobbies by many of the groups, reforms won't be easy to come by.

While the American public doesn't have the same concerns as Israelis do, they have others. It's interesting to contemplate what would happen if the U.S. took a cue from the peaceful consumer revolt in Israel. The march of the unemployed, for example, could see millions upon millions in the streets, demanding jobs.

Motley Fool contributor Melly Alazraki does not own any shares in the companies mentioned.

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