What Can American Business Learn from Israel’s Democratic Crisis?
After Israeli Prime Minister Benjamin Netanyahu returned to power at the end of 2022, he proposed new procedures for choosing Supreme Court judges that would give politicians more sway in the process and limit court rulings against Knesset laws. (Other troubling proposals didn’t gain as much attention, including rules to allow unlimited gifts to public servants, give prime ministers greater immunity from prosecution, and allow convicted politicians to continue serving in government.) At a time of rising authoritarianism globally, the proposed changes raised fears about Israel’s fragile democratic institutions and spurred huge protests across the country — including from the Israeli business community.
Prominent business leaders, venture capitalists, and economists have publicly voiced opposition to the proposals, arguing they could spell the end of Israel’s democracy and harm its economic growth. On April 15th, Moody’s downgraded Israel’s economic outlook from positive to stable, citing the “deterioration of Israel’s governance” amid months of street protests and political upheaval. There have also been reports of capital flight due to the political uncertainty.
Business for America stands for the idea that well-functioning democratic institutions and the rule of law are the best political system for a thriving market-driven economy, as well as individual rights and liberties. We believe that the laws that govern our country must make sense no matter who is in charge. The conflict in Israel is a reminder of the importance of the nature of the American constitution, the checks and balances between the branches of government, and rules to ensure integrity and accountability. These democratic institutions are essential to political stability and a competitive economy.
On May 23, 2023, Business for America co-hosted a webinar with J Street to discuss the threats to Israel’s democracy and the response of Israel’s business community. There are valuable lessons to be learned as we strive to build flourishing businesses during times of increasing social conflict and political risk.
The event was framed with remarks from Ian Bassin, the cofounder and executive director of Protect Democracy, who described the “authoritarian playbook” and the gradual erosion of democratic norms from leaders such as Venezuelan President Nicolás Maduro on the left to Hungarian Prime Minister Viktor Orban on the right. “The competitive authoritarian movements are sharing ideas… And those that still believe in protecting liberal democracy — essential to maintaining open markets and robust growth — we need to be trading ideas as well about how we protect ourselves against this.”
Israeli Tech Entrepreneur Orni Petruschka described the risk in his country. “Israel’s democracy is very fragile and the judicial overhaul… hampers the independence of the Supreme Court and removes the last check of the government to do whatever it wants in Israel, because Israel has no constitution… If the judicial overhaul is passed, the government could simply do whatever it wants, and we would not have the courts to curb it.”
Petruschka also detailed the Israeli businesses response. “The business sector took a leading role, and these days entrepreneurs and investors and managers are speaking up. They’re not only concerned citizens like the hundreds of thousands that are with them on the streets, but they’re also deeply concerned about the future of Israel’s economy… And as leaders of the tech sector they’re afraid that allowing Israel to become a semi-autocratic state with no judicial system will deny the certainty and confidence and trust that investors need… it will cause the collapse of the high-tech sector.”
Emmis Communications CEO Jeff Smulyan in Indiana experienced autocracy first hand when his company’s Hungarian assets were nationalized by Orban. He shared the reasons Indiana businesses feel the need to speak out. “The corporate community is more engaged in voting issues, social issues, for a number of reasons. One, hopefully because they think these are the right things. Two, because they realize that to attract a diverse workforce, they have to be capable of creating a welcoming environment. And that’s especially true in places like Indiana… I don’t know whether it’s altruistic or just economics but I’ve seen a massive shift [in corporate engagement].”
Bassin encapsulated key lessons for the business community by noting that C-suite leaders’ instinct may be thinking “I don’t need that headache. The problem is that headache is coming for you at one point or another whether you want it to or not. And as with a wildfire, the time to stamp it out is at the beginning when it’s just a brushfire, not when it’s gotten stronger… One company standing up is really difficult and you become an easy punching bag for those leaders… This is why it’s really important for business organizations like [Business for America], like the Chamber, like the Business Roundtable, and I will point out [Business for America] is doing a really good job on this… those organizations come together and essentially create kind of NATO Article 5 pact that an autocratic attack on one business is an attack on all… Israel creates a great model for us.”
