Nearly three months of rallies challenging government plans to weaken the judiciary are sapping investor confidence and deepening divides.
(Bloomberg) — Erez Shachar manages one of Israel’s top investment funds, with $1.1 billion in assets. Normally he can get senior officials on the phone with little effort. Yet the 59-year-old has spent the last 10 Saturday nights marching through Tel Aviv with tens of thousands of other protesters waving an Israeli flag, shouting “Shame!” and “De-mo-cra-cy!” and singing along to the tune We have no other country.
Like those around him, he is trying to make his voice heard in a new way. Accompanied by his wife, several of his children and friends, Shachar, co-founder of Qumra Capital, views a government plan to slash the power of the judiciary as an assault on the country’s liberal democracy. It is a fight that is tearing Israel apart, pitting leaders from business to the military to the tech sector against the right-wing government.
Banks and corporations have excused employees from work to join marches. Ehud Barak, a former prime minister and a celebrated military figure, has urged troops and reservists to refuse to serve if the government goes ahead with its plans. Startup whiz kids and intellectuals — like Yuval Noah Harari of Sapiens fame — have said they might move abroad. Money is already heading for the exit as Israelis with means quietly set up foreign accounts in countries like Switzerland, Lichtenstein, Portugal and the United Arab Emirates, bankers in Israel and abroad say.
What is shaking Israel is no youthful anti-establishment movement. It is the top professional classes who helped build the country — business leaders, doctors, lawyers and senior military veterans — taking to the streets against Prime Minister Benjamin Netanyahu’s administration and what they see as an effort to introduce a semi-religious autocracy. Some now greet friends with the Hebrew phrase, halcha hamedina, which translates as the nation is doomed.
“We had a silent agreement with the government: give us a liberal democratic country that allows us to build an innovation economy and we’ll leave you alone,” says Shachar. “We felt the rug pulled out. I’ve never been politically active before but there is no turning back.”
Under the proposals, unveiled in January, politicians would play a dominant role in the selection of judges and permit the Knesset, or parliament, to overturn Supreme Court rulings with a simple majority as well as remove some laws from judicial review altogether. Netanyahu hopes to get the bills passed before this Knesset session ends on April 4. He sees the protesters as an arm of the left that wants to take his place in office. The protesters say that without a strong, independent judiciary, the law for businesses and others will be beholden to politics.
President Isaac Herzog has been holding meetings trying to find common ground. “It seems like a paradox, doesn’t it? No missiles, no alarms, no red alert,” he told local officials last Monday. “But we all know deep down that this is a supreme national danger.”
Few see much will for compromise. If the laws pass, they could end up before the Supreme Court. And if the justices declare them unconstitutional, Israel would be facing an unprecedented crisis of institutional legitimacy.
Even if a deal is found before that, the impact of the past weeks has been profound. The rifts between Netanyahu supporters and opponents are deepening into chasms. “I’ve never seen this before — Israelis are ready to kill each other,” observed Daniel Ben-Simon, a former Labor Party member of Parliament.
At the same time, the specter of a fresh cycle of violence is emerging. The West Bank has seen 83 Palestinians and 14 Israelis killed since January, the bloodiest start to the year in some two decades. A new generation of armed Palestinian groups is forming and some Israeli settlers have rampaged through Palestinian villages. Key allies including the US and France, plus the UAE and other Arab states, have expressed alarm.
As Israel developed the most dynamic economy in the region over the past 15 years, many of its neighbors — Lebanon, Syria, Egypt and Libya — have faced near collapse, and rival Iran has spread its influence. The effect has been a reshaping of the geopolitical order, with Gulf allies like the UAE and Bahrain forming a US-backed security alliance with Israel. Should Israel fall into political dysfunction, Iran and its proxies could be energized, creating further uncertainty for the region, threatening global energy supplies and US power. A Saudi-Iranian rapprochement brokered via China, announced on Friday, shows how power relations are already being scrambled in the current uncertainty.
It is hard to pin down with any certainty just how much money has already left Israel. Some estimates are in the low billions of dollars. Riskified, an ecommerce company, announced last week that it is moving all of its $500 million in cash and equivalents out of the country.
Eynat Guez, chief executive of Papaya Global who made headlines by first announcing the withdrawal of money from Israel last month, is worried about investment, with the risk premium on its debt having already widened. “If we lose trust now, we’ve killed the country’s growth in the next decade,” she said.
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At the heart of this fight is Netanyahu, the country’s dominant political leader of the past two decades. Despite facing bribery, fraud and breach-of-trust charges which he denies, he was reelected in November after 18 months in opposition. It is his sixth term as prime minister and he heads a coalition government of far-right and religious parties led by men who speak with open contempt for the largely secular establishment.
Israel has no constitution. The refugees from scores of countries who founded it came with such a range of ideas about a Jewish state that they and their progeny repeatedly abandoned the effort. Three decades ago, the Supreme Court announced that the country’s basic laws — 13 statutes of foundational administrative principles and human rights — would serve that role, and the justices would measure legislation and executive action against them. The taking of private Palestinian land in the West Bank for Israeli settlements was invalidated; the exemption of military service for ultra-Orthodox was overturned; the years-long detention of African refugees was stopped; the election of a politician convicted of corruption nullified.
In other words, the high court has stood for civil and minority rights and the principles of a liberal state. That has enraged many on the right who believe that democracy is fundamentally about majority rule. If most people agree, why should a tiny group of judges in Jerusalem tell them no?
The growth in right-wing and religious parties in recent decades is partly the result of a shift by the ultra-Orthodox to greater political activity. The parties vowed to undermine the high court’s power and now they are in a position to do so.
Recent governing coalitions haven’t lasted long in Israel — it has had five governments in 10 years — meaning that most have been in a hurry. Since a requirement to form a government is to have a parliamentary majority, the ruling coalition can pass any law it wants, checked only by the Supreme Court. If the court’s power is removed, the government could saddle the free market with heavy subsidies for religious communities, West Bank settlements could expand unhindered and a promised death penalty for terrorists would be enacted. Even though many oppose it, Israel would effectively have redefined itself more through religious nationalism than liberal democracy.
Only a decade ago, Netanyahu spoke proudly of Israel’s independent judiciary but has more recently expressed bitterness toward the legal establishment over the corruption cases against him, which he says are politically motivated. And if the judicial changes go through, they may help him avoid conviction as handpicked judges take the bench and the court’s power is diminished.
In truth, even many opponents acknowledge there is a case to be made for rethinking the selection of judges and Supreme Court power. Right now judges have a dominant role in picking their successors, and rules of standing and criteria for cases are open ended. But what has alarmed so many is the breakneck speed and radical nature of the government’s plan. “When someone enters your house with a sledgehammer, he’s not coming for repairs,” says Roy Katz, a broadcaster and lecturer.
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At first glance, the Israeli demonstrations seem reminiscent of the anti-Vietnam War protests in the US of the late 1960s — educated, prosperous citizens marching against the populist policies of a conservative administration. But the US protests were led by the young who didn’t want to go to war. In Israel, the demonstrators are among the most decorated military veterans — people like Yair Geva, 47, a senior partner and head of tech at Herzog, Fox and Neeman, a top Tel Aviv law firm, and a veteran of a special Air Force unit.
The Israeli military has long been the rough equivalent of the US university system — a sifting for the best, brightest and most privileged. On March 1, as Geva was taking part in a street rally, police hurled a stun grenade in his direction, damaging hearing in his left ear. He was taken to hospital. “I think we’re close to a point of no return,” he said in a telephone interview, expressing concern that some will avoid reserve duty as an act of defiance. “I think there’s a loss of trust in the system.”
Nothing has signaled a crisis to Israelis as strongly as this possibility, that top military units could be understaffed because protesters refuse to serve. To complicate things further, most of the high-tech elite emerged from military units dedicated to technological innovation, tightly knitting together two pillars of this society.
Like the scale of the money that’s leaving, the refusal to serve is hard to pin down. It is as much about messaging by Netanyahu’s opponents as reality: stop the policy changes or the things that make this country strong — its economy and military — are at risk.
Until recently, Shachar and many other protesters would have probably said that life in Israel was pretty good for them. Despite the inconclusive elections, flare-ups with Hamas, the Islamist group that effectively controls the Gaza Strip, and deepening inequality, they felt mostly safe.
Israel led the world in the rollout of Covid vaccinations and studies show its people live longer and feel happier than the vast majority of other nations. The landscape is bursting with cranes on every horizon, high-speed trains and light rail systems going up, economic growth and family size higher than anywhere else in the developed world. Israel’s tech sector attracted $50 billion from foreign investors over the past three years alone and the shekel is the only currency that gained on the dollar in the past decade.
A country that began just 75 years ago with 800,000 people, many of them refugees from Nazi slaughter — and led to the displacement of hundreds of thousands of Palestinians — turned into a powerhouse of 10 million inhabitants with a GDP per capita exceeding Germany’s.
Yet many religious Jews, who benefit from the wealth created by high tech entrepreneurs, feel like outsiders looking in. Some attribute the country’s achievements to their own piety. Their prayers and Torah study are what have brought God’s favor. For them, Tel Aviv’s fast pace and glass towers are the problem, not the solution, and the protests are an attempt by a minority to stay in power.
“A lot of those people are afraid that the country is changing,” said Simcha Rothman, who heads the Knesset committee formulating the overhaul and backs the change. “When you ask the protesters what bothers them, they talk about the ultra-Orthodox and religion and state. But that’s democracy.”
By contrast, for liberal Israelis, Torah study without productivity is a drain on a dynamic economy.
Each group has been expecting the other to disappear. The protests over the judiciary have put them firmly on a collision course.
The ultra-Orthodox — few of whom serve in the army — make up 14% of the population with families typically of 6-8 children and growing clout. This too is a result of a country with a generous welfare system and first-class health care — much of it funded by high-tech-generated wealth. “The feeling of the protesters is that they are carrying the burden,” says Yossi Beilin, 74, a former justice minister. “Fifty percent of the country don’t pay taxes, and many don’t serve in the army. The ones who do are afraid what they built is being destroyed.”
Biotech entrepreneur Anat Naschitz is furious but optimistic. She says the hope is that the central question about Israel’s identity — what does it mean to be a Jewish democracy — might finally be addressed.
“We are the startup nation,” she said. “We’re smart and trained and we’re fighters who have learned to work together in a crisis. We need a constitution, a stronger separation of the branches and a strong court. We have all the experts. The government needs to take the gun off the table before they destroy this country.”
–With assistance from Ben Bartenstein and Marion Halftermeyer.
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