A free market is not a goal. It is a means to achieve a fair market, while it is quality and price that are supposed to compete for the consumer’s attention.
Public protests over the cost of living come up against a weighty, principled argument made by groups of economists and business people: Don’t intervene in the free market!
This argument was also made by the banks, in opposing legislation that sought to regulate the fees they charged for checking accounts. It was also made by the cellular phone companies, which were not in favor of the welcome amendments in favor of consumers, initiated by the Ministry of Communications. And it has been heard from economists in government departments, who worked to remove price controls from various food products, resulting in the massive price rises that led to the "Cottage cheese" protests.
Two questions should be asked regarding an ideology that sanctifies the free market:
1. Is a free market indeed the goal to which we should aspire or only a
means for ensuring the welfare of consumers?
2. Will the market in Israel really be a free market if the
government “leaves it alone”?
Let me state at the outset: a free market is not the goal. It is a means of achieving the goal, which is a marketplace that is fair for both consumers and businesses.
The basic assumption is that a free market should create the conditions for free competition between businesses, and then quality and price will compete for the consumer’s attention.
A free market is desirable – only if it ensures a fair purchase deal
Such a situation will be profitable for those who can invest in the production (or import) of quality goods, who can market them effectively, and who are willing to price them in a way that reflects a cost/benefit ratio (or value for money) that makes them attractive for consumers.
Consumers will also benefit from improved quality of goods, from service that is worthy of the name, and from reasonable pricing – in short, a fair purchase deal. A free market is desirable, therefore, only if it has the ability to ensure a fair purchase deal for consumers, through fair business practices.
Is this the state of the market in Israel, from the consumer’s point of view? In the banking sector, by using a maze of account fees, the banks were able to thwart the consumer’s ability to make comparisons, which is a basic requirement for being able to bargain and bringing down prices.
The high levels of fees and interest rates made consumers feel that they were enslaved to the banks and their fee structures. It was only legislative intervention that restricted the number of fees, eliminated a number of particularly irritating fees, and also gave the Supervisor of Banks explicit powers to set fee levels.
In the “jungle” there’s not much hope for the weak The cellular
communications companies also did all that they could to lock consumers in. From their point of view, the “free market” was fertile ground for being creative in coming up with ways of raking in the profits from the public.
In this case, it was not enough simply to make it difficult for the public to understand their pricing, and to make comparisons between the different companies. The companies locked their customers into 3-year contracts. This system of locking clients in has gleefully been adopted by other companies in the communications market, such as the cable and satellite television companies. Is this a free market?
Some would already suspect that this use of the term “free market” is actually a kind of ruse to shackle consumers and block any government supervision or intervention aimed at consumer protection.
It is a mantra that is loudly repeated by tycoons, but which neutralizes and eliminates any fairness in the country’s commercial life. Their intention is, of course, not a true free market, but rather a market that will remain unregulated, and thus subject to their concentration of power and control. This approach is called the law of the jungle. It offers little hope for the weak and little justice for consumers.
The time has come for the government to get involved
At times, opposition to government intervention in the market also comes from government departments themselves. This is no problem when it is based on a reasoned determination that fair competition exists within a particular branch of the economy.
However, if the opposition – to price control, for example – stems from a desire to bring about “savings” in allocating resources for enforcement, or from a concern that producers and marketers may be overly critical of the moves, this should not be a reason to acquiesce to the government’s refusal to carry out its role in consumer protection.
The State of Israel desires a fair market. A fair market can be achieved through a combination of free competition in those market sectors in which it can exist, and counterbalancing government intervention – legislative or ministerial – in those industries in which there is no competition.
This is not just a consumer interest. Many businesses also suffer from the predations of powerful corporations and businesses that act inappropriately. The time has come for the business sector and the consumer public to join hands in a partnership that will lead to business transactions that are fair and profitable for both sides.
And the time has come for the government to get involved in this process, by dispersing concentrations of power, by removing obstructions to competition, or by controlling prices, but particularly by abstaining from policies that leave the market uncontrolled, and definitely not free. Adv. Ehud Peleg is the CEO of the Israel Consumer Council.