The Israeli economy is part of the world economy, and when the global economy is threatened by a slowdown and crisis, in addition to the vicissitudes of inflation and interest rates – we must prepare for the arrival of these storms here, too.
Signs of crisis, even if only temporary ones, can already be seen in high-tech and the layoffs that accompany it – and possibly also in the area of investments, though only on the margins.
When the global economic crisis of 2008 and 2009 erupted, heading the Israeli government was a man who knew how to navigate economic policy that not only kept Israel afloat but also created conditions for accelerated growth in most sectors and turned it into a mini economic superpower in general, and in high-tech in particular.
Now, on the edge of a possible new world crisis, fate may once again come to our aid – but not under just any condition. The business world in general, and the financial sector in particular, including the area of investments, needs a political and governmental situation that balances properly between the branches of government and a fair and functioning legal system that has earned the public’s trust and protects its rights. The struggle today over the legal system is seemingly about this.
“Seemingly,” because in practice the motives concern the political level more – and less the issues of principles and values, or even the system’s functioning. The proposals the government has raised on these matters are for the most part in keeping with the values and methods of the democratic world, and in the past of Israel too. But over the years these have blurred as “over-legalization” has proliferated, along with the advent of the “legal revolution” and the damage to the separation of powers between the Knesset, government and courts – without which there is no salvation, not for democracy, not for civil rights and not for the economy either.
A comprehensive change in policy for the legal system is a democratic process that must not be distorted by raising deceptive and tendentious arguments, and all the more so if this could pull the rug out from under the Israeli economy. The proposals brought up so far are basically outlines, and not a finished product. On some issues – such as appointing judges to the Supreme Court or the Supreme Court override clause – it will be necessary to put stoplights in place before final legislation. To do so, we must dive deep into true dialogues, and not demonstrations in the street or the speeches of frustrated politicians – and certainly not resort to calls for “civil rebellion” – overused words for a revolt against the state itself.
As Martin Wolf, the chief economics commentator at the Financial Times, says, democracy and a free economy have a reciprocal relationship – so the use of economic arguments to attack an elected government could well critically injure both of them. “Warnings” about the “dangers” to the Israeli economy from the legal reforms are being voiced now. Even the governor of the Bank of Israel, Prof. Amir Yaron, was dragged in for this purpose against his will, and some are arguing that a “consensus is growing” that the “government’s destructive process against democracy endangers the flourishing of the economy.” Others warn against a downgrading of Israel’s sovereign credit rating or the withdrawal of deposits from Israeli banks – even though as of now the stock market and Banks Index show otherwise.
In reality, the stopping of specific investments stems mostly from international trends and negative developments in specific industries. As for credit ratings, international bodies primarily examine all aspects of the economic and budgetary management and the debt ratio – along with the legal and regulatory concerns in that same country. As far as this is concerned, the government commitment to a free economy and ensuring property rights acts in its favor from the standpoint of international economic bodies.
The Wall Street Journal has published four articles, including an editorial, praising the Israeli government’s planned actions. One criticizes what it calls the High Court of Justice’s demand for a veto on political appointments, another calls it “the most activist Supreme Court in the world.” Another supports the legal reforms and attacks the High Court’s actions as a lack of checks and balances contrasting it with the U.S. Supreme Court. Another article, written by the editors of Newsweek, argues that “juristocracy” (excessive legalization) does not correspond to the principles of parliamentary supremacy and the will of the people, and not with democracy either.
I prefer to speak about balance and not supremacy, but when the public trust in the legal system is weakened, the result is we no longer have a trustworthy legal system. It would be better to listen not just to the great lights in academia but also to those who work in the investment field, such as the CEO of the Phoenix Insurance Company, Eyal Ben Simon. He said “foreign investors are not asking at all about the reform and there is an increase in interest in the Israeli economy.”
As for the steps to ease regulation – Roy Saar, a high-tech entrepreneur and partner in a venture capital fund, said: “When every action needs the approval of the attorney general as the supreme authority – there’s a problem.” As for high-tech – how can they explain that in China, maybe the most totalitarian of countries, the high-tech sector is actually flourishing?
A free and open economy is an inseparable part of democracy. Both cannot exist without the rule of law and both are based on the freedom of action of the people involved. The proposed legal reforms are aimed at guaranteeing this.
Zalman Shoval is former member of Knesset and Israeli ambassador to the United States, and former chairman of the Association of Banks in Israel.
Netanyahu's Legal Reform Aims to Boost Israel's Economic Freedom
The Israeli economy is part of the world economy, and when the global economy is threatened by a slowdown and crisis, in addition to the vicissitudes of inflation and interest rates – we must prepare for the arrival of these storms here, too.
Signs of crisis, even if only temporary ones, can already be seen in high-tech and the layoffs that accompany it – and possibly also in the area of investments, though only on the margins.
When the global economic crisis of 2008 and 2009 erupted, heading the Israeli government was a man who knew how to navigate economic policy that not only kept Israel afloat but also created conditions for accelerated growth in most sectors and turned it into a mini economic superpower in general, and in high-tech in particular.
Now, on the edge of a possible new world crisis, fate may once again come to our aid – but not under just any condition. The business world in general, and the financial sector in particular, including the area of investments, needs a political and governmental situation that balances properly between the branches of government and a fair and functioning legal system that has earned the public’s trust and protects its rights. The struggle today over the legal system is seemingly about this.
“Seemingly,” because in practice the motives concern the political level more – and less the issues of principles and values, or even the system’s functioning. The proposals the government has raised on these........
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