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The regulatory burden – the rhetorical failure / Adv Ehud Peleg

The government has decided to implement a plan designed to reduce regulation, in which it considers the state as being one of the culprits for the cost of living. The request to reduce regulation is regularly raised by the business sector, in attempt to fend off accusations of excessive profitability and swinish capitalism causing high prices.


In our region, there is a danger that good intentions might throw the baby out with the bathwater. One must pay close attention that this will not happen with respect to the current reform.


First, regulation and bureaucracy should be separated.


There is no doubt that in many cases, bureaucracy is burdensome, expensive and unnecessary, and contributes both to the cost of living and to the feeling of tiredness among businesses and the general public. Is should be reduced as much as possible. The "Balconies reform" initiated by the Prime Minister in the past, was one of the attempts to deal with this problem.


However, regulation [in Hebrew – Regulatsia] is the Hebrew translation for "arrangement" and means government intervention in ensuring proper living arrangements, and finding arrangements that counterbalance conflicting interests.


In economic life, the market is expected to regulate itself through the various forces of supply and demand. The market forces are supposed to guarantee free competition in quality and price, and to the opinion of the economists, this is the goal to be reached


However, when there are barriers to competition or incremental centralized power in the hands of a few players in the market, market failures are created, and then, free market does not guarantee real competition, but becomes a lawless market of powerful forces dictating high prices. The law of the jungle where only the strongest makes profit is unfair, not for small businesses neither for consumers. He certainly does not lead to any decrease of the cost of living.


In a non-competitive market, there are some cases requiring governmental intervention to protect the consumers, and a need for regulation is raised.
The slogan frequently expressed by tycoons and big corporations against this governmental intervention - "Do not disturb free market" - is actually an attempt on their part to perpetuate their centralized power and their control over the market and the prices.


A healthy economy is not just a free market, it is also a regime of brakes and balances, just like democracy is not just the rule by the majority, but also and primarily a regime that guarantees human and civil rights and mutual supervision of the authorities.


If there is no self-restraining of the major players in the market, external restraint by the state authorities is necessary, since these authorities are extensions of the public and are responsible for its protection.


The goal is not "free market" - that is the way, where it exists. The goal is a fair market for businesses and consumers. In order to guarantee "fair market" in an economic culture that is not characterized by excessive fairness, governmental intervention is necessary to disperse concentrations of power, remove barriers to competition, sometimes also through price controls and in order to guarantee consumers' rights against unfair commercial practices.
For example, "regulatory burden" was lately taken care for through a resolution made by the government to lower VTA's level by 1%. As a result, have consumer prices been reduced by one percent as the government intended, or did many businesses rake in the profits into their pockets? Actually the price of products under control (and under regulation) decreased accordingly.


In the last session of the Knesset, the Consumer Council initiated a series of bills that came as a response to prejudice against consumers and their rights, like a bill aimed to prevent aggressive collection of debts - following the "Iqtech" case - and a bill for supervision of marketing spreads of fruits and vegetables, due to their high prices as a result of overstated profits of the marketers.


Such bills illustrate the fact that regulation was not born in a vacuum, but in a reality in which businesses take advantage of consumers who must be protected. Businesses should not blame the regulation for this, but they should rather blame themselves and their own conduct.


Proportionate regulation is not a burden, but rather a barrier that separates between economic anarchy and a healthy economy, between a jungle of interests and a fair state.

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