Last week, an open letter was published bearing the signatures of hundreds of Israeli economists, which claimed that the judicial reforms currently being considered by Prime Minister Netanyahu’s coalition could “cripple” the economy by placing “great political power in the hands of a ruling group without strong brakes and balances.” Richard E. Epstein and Max Raskin disagree. (Subscription required.)
This statement is notable for two reasons. First, many of these economists supported political parties that opposed Benjamin Netanyahu’s free-market reforms while he was finance minister from 2003 to 2005. These reforms have allowed the country’s economy to boom for almost two decades. Second, Israel’s unelected supreme court—not the Knesset, its elected parliament—is the branch of government that actually holds unchecked political power. Rather than endangering economic growth, these proposed judicial reforms provide a necessary check on the one court in the Western world with nearly unlimited power to dictate economic and political life.
Energy policy is a good example of how Israel’s unchecked judiciary creates economic uncertainty. In 2016 the Israeli Supreme Court blocked the government’s plans to develop natural-gas fields, drawing huge criticism from the companies involved. The court dismissed the plan on grounds that it undemocratically bound future governments with a clause that ensured the agreement’s longevity. But in 2022 the court approved the anti-Netanyahu government’s maritime energy agreement with Lebanon, reinterpreting a Basic Law so that it didn’t require a democratic referendum in the case of an important change over territorial sovereignty.
These decisions superficially read like legal opinions but are, in effect, political judgments. They involve sensitive matters of national security and sovereignty that everywhere else are decided by the elected branches of government. A proposal that lets a majority of the Israeli parliament overturn these decisions can hardly be regarded as antidemocratic. Indeed, it is a core feature of Canada’s constitution.
But the economists ignore the crucial truth that the reforms will bring Israel’s judicial systems more in line with Western norms. Their letter cites the Nobel laureate Douglass North’s claim that unchecked concentrations of power are bad for economies, implying the Knesset would become too powerful. But North was talking about the importance of stable institutions to promote entrepreneurial activity, not an oversized version of judicial supremacy. Like many public-choice economists, he was a strong defender of the rule of law, which isn’t the same thing as the rule of lawyers—or of unelected judges.
Read more on Wall Street Journal: https://www.wsj.com/articles/israels-proposed-judicial-reforms-arent-extreme-economists-credit-rating-balances-knesset-politics-standing-11675014190