Keinon’s analysis is timely and accurate, but misses some of the more ridiculous details. At one time a kibbutz cooperative was granted a national monopoly on delivering raw milk from the farms to the dairies that retail the milk and milk products. This monopoly was sold a few years ago to a Chinese company. There is little reason for the government to allow this monopoly to continue. It is a given that monopolies will always be inefficient and will maximize their profits at the expense of their customers, who pass on the excess costs to the Israeli public. Then it gets worse; the government decides how much raw milk can be produced in Israel, so each milk farm must have a license to produce say X litres of milk. This license is tradable and very expensive. From time to time the government decides to increase the total milk production. The extra production is partially doled out to producers that have ‘protectia’ or who are able to bribe the clerks handing out the licenses; the balance is used to increase old licenses by the percentage required to bring the total up to the agreed level. This naturally makes a milk production license very valuable. The cost of acquiring such a license is very high and is factored into the cost of raw milk sold.
Smotrich’s solution; allowing imports to compete with domestic production, will reduce prices to the Israeli consumer, but is going to damage the domestic milk farmers. However if this was combined with the elimination, or at least extensive reduction, of bureaucratic control of the industry and elimination of monopolies, Israel’s farmers could survive and prosper and consumers could buy milk and milk products at prices comparable with those prevailing in Europe and America.
stephenscohen.com 