Israel's finance minister listens carefully as citizens grumble over price of food

The social protests that erupted in the summer of 2011 are still reverberating in Israel, and Finance Minister Moshe Kahlon's refusal to allow the price of milk to go up means he senses growing consumer anger.

al-monitor Finance Minister Moshe Kahlon attends a ceremony for the signing of a housing agreement in Sderot, Israel, April 9, 2018.  Photo by REUTERS/Amir Cohen.

Topics covered

consumer boycott, dairy, food prices, knesset, israeli politics, subsidies, social justice movement, boycott, kulanu, moshe kahlon

Jun 21, 2018

Finance Minister Moshe Kahlon has a highly developed sense of smell, especially when it comes to the public’s mood over socioeconomic affairs. Sometimes he can sniff it out even before it rises to the surface.

That’s what happened in 2009, right after he was appointed communications minister. He took on the cell phone companies, which were charging exorbitant prices, and despite enormous pressure was able to open the market to competition and bring prices down. Back then, two years before the social protests erupted in the summer of 2011, the sentiments he picked up on foreshadowed the emerging rage among the middle class over the cost of living that later on brought hundreds of thousands of people into the streets.

The cell phone revolution turned Kahlon into a powerful brand in the fight for socioeconomic justice. He founded Kulanu and after the 2015 election was appointed finance minister, largely because of that successful struggle.

So when he expressed concern that a rise in prices of basic foodstuffs could hurt the party electorally at a June 18 meeting of the Kulanu Knesset faction, it was more than a passing observation. “It’s not an easy story, particularly for a party with a social agenda. If we were HaBayit HaYehudi, it wouldn’t matter,” Kahlon can be heard saying in a recording from the closed meeting that reached Channel 10. Later, he made it perfectly clear that he doesn’t plan to sit twiddling his thumbs. “We’ll check each and every item. We’ll do the work in the Finance Ministry. We’ll move on to the Ministry of Economic Affairs too. We must be prepared for this.”

Kahlon has identified covert trends that could fester and perhaps even develop into a consumer protest. This time, however, he is the one steering the Israeli economy, and next year is an election year. A rise in prices that gets out of control is the last thing that Kahlon needs. His victory last May, when the Central Bureau of Statistics recorded a drop in housing prices, came after three years in which Kahlon was hard-pressed to show any successes whatsoever.

July will mark seven years since the biggest social protest in Israel’s history. Hundreds of thousands of people took to the streets, and Netanyahu’s position as prime minister was in real peril. At the time, the trigger was the cost of living and of housing, neither of which would stop rising. As a result of the protests, there was a drop in the cost of basic foodstuffs, and the lower prices remained in place for years. Over the last few weeks, however, economic publications are reporting a significant rise in food prices by as much as 10-30%.

In the background, dairy producers are pushing for a rise in prices. The prices of dairy products are controlled in Israel, and producers claim that they are operating at a loss. They threaten that if the government does not allow them to raise their prices, they will be forced to fire workers. Kahlon sees the figures and hears the people’s voices. Based on what he said, it seems he is preparing for a new campaign, pitting himself against the big food companies. Meanwhile, in his capacity as finance minister, he is refusing to sign an order that would allow the price of milk to rise, even though Agriculture Minister Uri Ariel has already signed it and the members of the Finance Committee are pressuring Kahlon to sign too.

Kahlon sees these trends in the market. He realizes that part of the reason that prices are going up is that the costs of raw materials are rising all around the world, a factor he cannot control. The risk that the rage will be turned against him is real. Having read the map, the veteran of past social wars is again donning his Don Quixote uniform.

Economists believe that this trend of rising prices has not yet reached its limit and will continue, raising a question: Are Israelis ready for another mass protest, seven years after the last one?

For years it has been common to dismiss the achievements of the 2011 protests, largely because of how hard it was to burst the real estate bubble. On the other hand, the protests resulted in a major shift in priorities and agendas. The socioeconomic discourse has changed beyond recognition. The public is much more aware of its ability to have an impact, while the government has learned to speak in social terms and recognizes the need to present social achievements for electoral leverage. Even the tycoons, symbols of the rapacious greed of the pre-protest era, have collapsed one after the other.

The people learned that they have power and that a consumer boycott is an effective tool. In 2011, Facebook was used to organize a consumer boycott of cottage cheese after its price shot up dozens of percentage points in a very short period. At first the companies ignored the consumers’ demands, but once sales dropped, they succumbed and lowered prices. The CEO of the then-powerful Tnuva corporation, Zehavit Cohen, lost her position over her mishandling of the boycott.

The major food companies and supermarket chains did not foresee the 2011 protests. It was a traumatic period for them, with a decline in sales and the realization that Israeli society had changed. Many of them also fear a rise in prices now and are treading cautiously in dealing with consumers.

The protests affected and continue to affect Israeli politics. The 2013 and 2015 elections were particularly beneficial to socially minded members of the Knesset and to parties focused on a social agenda. Two leaders of the 2011 protests — Itzik Shmuli and Stav Shaffir — now serve in the Knesset as part of the Zionist Camp. They are both at the forefront of the struggle for various social agendas.

Social issues will continue to feature in the next round of elections. A prime example is the recent announcement by highly regarded Knesset member Orly Levy-Abekasis that she will create another party with a social agenda. Her party may not be formed yet, but it is already getting five to seven seats in the polls. Levy-Abekasis is eating away at everyone's voters — the Likud, Yesh Atid and Kulanu — proving that the effect of the social protests is still here, seven years after that turbulent summer.

Prime Minister Benjamin Netanyahu also remembers that summer. From one Saturday night to the next, protests against the cost of living and his own government grew larger and larger. As many as 400,000 people attending at their high point and the movement threatened to become an uprising of the middle class, which includes many Likud voters. Finally, in August 2011, Netanyahu was forced to create the Trajtenberg Committee to investigate the issues behind the protest.

It will therefore be interesting to keep tabs on the struggle by dairy producers to raise the prices of their subsidized products. If they succeed, it will mean that restraints have been lifted. So far, Kahlon has refused to sign the order that would allow them to raise prices. This tells us that the man with the sharpest sense of the people’s mood, especially when it comes to socioeconomic issues, can feel something stirring.

Continue reading this article by registering at no cost and get unlimited access to:
  • Al-Monitor Archives
  • The Week in Review
  • Exclusive Events
  • Invitation-only Briefings