This article in the NY Times DealBook captured my attention. /” Overhaul of Israel’s economy has lessons for the United States. ” There are lessons to be learned, though the scale of Israel’s problem never reached the level of inequality seen in the United States; it is a cautionary tale.
- “Per Steven Davidoff, of the Times, American’s may talk about income inequality, but Israel has done something about it. Yes, the mass protests of 2011 helped. However, the Press and the Knesset were already concerned about income inequality in 2008, when they formed a Committee, to look into the Corporate Pyramids and their influence on the Israeli economy. By 2012, along with a sustained campaign by Haaretz, a leading “liberal” newspaper in Israel, the government Committee agreed, to break up the Corporate Pyramids. (They were Large Corporations having subsidiaries , whose subsidiaries formed their own set of corporations, like a Pyramid, destroying free competition in it’s path.) The Committee also recommended the prohibition of significant cross holdings between Financial and non Financial groups.
- For better understanding, a corporation, like GE, could no longer “keep” it’s financial unit , which holds $500 Billion in assets. The result would be that the Pyramids could no longer fund themselves, using their access to cheap financing to give themselves an unfair advantage over their competitors. It also insured, that the Financial Institutions did not bring down entire corporate groups if they imploded.
- A “Bill” was introduced to the Knesset amongst legal wrangling, lobbying and threats , the conservative government of Bibi Netanyahu supported the legislation. The head of Israel’s central bank, Stanley Fischer , supported the Final Bill.( He is now the leading candidate for Vice Chairman of the Federal Reserve in the USA. )
Was this the most comprehensive bill to pass the Knesset? No. But it was enough to garner populist support and the votes in support of dramatic change in Israel’s Economic policy. The Committee’s recommendations “to break up the Pyramids and separate significant Financial and non financial companies became law.”
A cautionary tale, loosely transcribed from the original. With a single bill and several large changes in Corporate law, Israel is looking toward overhauling it’s economy and hopefully reducing income inequality.
What would this mean for America? Go back to 1990 when the 5 biggest Bank’s controlled only 9.67% of the Economy rather then 44%. It seems, in a Democracy, where there is a will to decrease inequality, change occurs. We can do it, and hopefully, we won’t wait for another painful lesson like 2008? We don’t want Banks to implode again before we take action. Politics effects us! We have choices to make.