-- June 19, 2011- Cottage Cheese Revolt

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A Daily Analysis
By Marc Schulman

June 19, 2011- Cottage Cheese Revolt

It's been a week since I last wrote. Since happily, there has been very little news emanating from Israel. The one story dominating the news over the course of the last few days in Israel has been the facebook organized boycott of cottage cheese. The boycott has been gaining steam in the last week. At the moment, the protest seems to have reached a critical mass, such that the cottage cheese is piling up in the supermarkets untouched. The ostensible cause of the boycott is the doubling of the cost of cottage cheese in the last five years (from 4 shekel to 8 shekel per container). The rise has occurred in the years since government price controls on key diary products were removed. Needless to say, the boycott is not really about cottage cheese. The boycott is about much larger issues that have been boiling, just below the surface, for the past few years. However, before I go into those issues, a few words about cottage cheese. Economically, the problem with cottage cheese is that the government logically removed the price control on this basic food staple, making the normal claim that the market would take care of keeping the price in check. Unfortunately, that does not work when milk, the underlying ingredient in the cheese, is controlled by a government sanctioned monopoly. The cheese market is controlled by at no more than three companies, and neither cheese, nor milk is allowed to be imported freely.

But to get to the bigger issue, Israel is experiencing increasing income disparities, very similar to what has been happening in the US. However, the middle class in Israel are starting at a lower point than their counterparts in the US. In the last 5 years of very rapid growth in the Israeli economy, 80% of Israelis have not seen a real growth in their incomes, despite the general growth of the economy. The economic windfall has all gone to the wealthier segments of the society. That would be bad enough, except on top of that, prices in Israel have been rising steadily, to the point that, it is one of the more expensive places in the world to live. However, 70% of the households earn below the national average (average, and not medium) ; with the average being just shy of 8.000 shekel a month. That translates into $27,000 a year, just a little more than half the American average of about $50,000 annual salary. Keep in mind that prices are about the same in the US and Israel. There is therefore a great deal of anger within the Israeli public. If the Israel politicians learn to constructively direct that anger, they might have a chance of upsetting the Israel political apple cart.

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