Israel's public and political discourse regarding privatization is often framed in black and white terms, either for or against a single privatization model. Typically, the discussion focuses on elitist privatization, where public assets are transferred to the control of a small, privileged elite. However, an alternative model exists: social privatization.
Social privatization is the process of transferring state-owned assets to a broad segment of the population, rather than concentrating them in the hands of a small group of wealthy investors. This model seeks to redistribute wealth accumulated and managed by the state, expanding ownership and access to capital more inclusively and equitably.
The primary goal of social privatization is to promote a fairer and more balanced distribution of wealth by reducing capital concentration and spreading economic control more broadly. This involves expanding public access to capital—whether newly created or previously concentrated by granting ownership rights that were not available before. This process must be conducted responsibly, under transparent government regulation and oversight, to ensure it delivers meaningful benefits to the wider population.
It is important to clarify that the concept of social privatization, as discussed here, refers exclusively to the transfer of state-owned business enterprises. Public services, non-profit entities, and land are explicitly excluded from this framework.
The first phase of social privatization involves distributing shares and options to the general public and company employees, instead of selling them to private investors, as is typically done today. The establishment and ongoing maintenance of state-owned enterprises have been largely funded by taxpayers, making the public their primary stakeholder. Therefore, these companies rightfully belong to the public. Converting a state-owned enterprise into a publicly held company marks the essential starting point of this process.
Next, the process requires setting clear guidelines for the company’s management and corporate governance as a publicly held entity. The framework must be established by the government, and the privatization process will not proceed until these terms are formally agreed upon.
Social privatization has the potential to significantly reduce economic inequality by broadening capital ownership among underrepresented groups, such as company employees, and by giving the wider public a direct stake in the economy. While the state may experience a temporary reduction in direct tax revenues due to the distribution of shares, this is expected to be balanced by higher indirect tax revenues generated through wider wealth creation. Moreover, privatization often drives productivity gains, which support overall economic growth and reinforce the economy’s resilience.
Moreover, transferring control to the employees ensures that any streamlining of operations is done responsibly, reducing the risk of mass layoffs. Thus, social privatization does not necessarily equate to workforce cuts but can lead to more sustainable and inclusive economic practices.