In a country where economic policy is often designed to suppress competition and efficiency, Israeli agricultural policy stands out as the most inefficient, regulated, and distorted sector. Professor Steven Plaut of Haifa University demonstrates that no other single area of public policy does so much economic damage.

Agriculture has a special place in the Israeli heart. The kibbutz epitomizes its founders' socialist ideals. Self-sufficiency in food and settling areas outside the urban coastal zone with agricultural communities are believed to promote national security. Plaut shows these policies are failures. Moreover, the folly of bad policy is that billions of taxpayers' dollars have been sunk into a bottomless pit in a futile attempt to prop up and bail out the communal kibbutzim, the cooperative moshavim, and private farmers. These subsidies will cost as much of a proportion of gross national product as the American savings and loan rescue. To make matters worse, the Knesset's final act before its dissolution in March 1992 to prepare for the June 23 election was to instruct the banks to write off a billion shekels in farm debt.

Food markets in Israel are organized into anticompetitive, monopolistic structures, which retard efficiency nd transfer farmers' income into costly bureaucratic overhead. Licensing requirements and other prohibitions effectively restrict output and raise prices.

Plaut demonstrates that proponents of massive government intervention in agriculture are ignorant of elementary economic principles of supply and demand. To raise the productivity of Israeli agriculture, Plaut recommends abrogating all marketing boards' monopolistic privileges, removing anticompetitive regulations and restrictions in domestic commodity markets, abolishing monopolistic control of food and farm input imports, and curtailing the Ministry of Agriculture's activities.

Steven E. Plaut is a Policy Analyst at the Institute for Advanced Strategic and Political Studies, and Senior Lecturer in the Department of Business Administration at Haifa University.