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Israel's "Useless Class" Revolts Against the Supreme Court

Yuval Noah Harari, the Israeli high-tech sector's court philosopher, rationalizes gutting welfare states in post-industrial economies. He claims Industrial Era governments "invested heavily in the health, education and welfare of the masses because they needed millions of healthy labourers to work in the factories." However, as economies transition to a high-tech-based, post-industrial age, "the masses are becoming redundant." Harari predicts the masses will become an unemployable, "useless class." And, "once the masses lose their economic importance and political power [emphasis added], the state loses at least some of the incentive to invest in their health, education and welfare." Under such circumstances, he concludes the masses' survival "depends on the good will of a small elite." Such condescension abounds among Silicon Wadi's beneficiaries, who rely on an omnipotent Supreme Court to disenfranchise Israel's "useless class."

Three parallel processes starting in the 1980s caused Israel's current constitutional crisis: (1) neomercantilist government policies cultivating a globally-integrated high-tech industry, (2) pauperization through slashing both welfare benefits and public capital stock investment, and (3) judicial empowerment protecting Israel's new oligarchy from redistributive legislation. The 2022 Knesset election produced a coalition vowing to expand Israel's social safety net and protect its agenda from judicial review by restoring parliamentary sovereignty and changing the Judicial Selection Committee's composition. Currently, sitting justices and unelected representatives from the Israel Bar Association comprise a majority of the Judicial Selection Committee's members, meaning Knesset elections cannot alter the Supreme Court's ideological orientation.

Someone like Harari, who warns "the grandchildren of Silicon Valley tycoons might become a superior biological caste," perhaps attributes Israeli high-tech moguls' success to merit. However, Israeli governments used generous subsidies, redistributed from its proto-useless class, to promote the high-tech sector and create a domestic venture capital industry.

Current account deficits from independence through the early 1980s meant Israel always faced a possible balance of payments crisis. To foster a high-tech, export-oriented infant industry, the Knesset passed the 1984 Law to Encourage Research, Development and Technological Innovation in Industry. This statute established a fund that financed up to 50% of R&D expenses for approved projects while companies repaid the government through a small percentage of royalties each year. It also arranged for favorable loans and tax holidays. Over time, the Office of the Chief Scientist (OCS), succeeded by the Israel Innovation Authority, managed an ever-increasing array of corporate financing programs. The Public Technological Incubator Program provides grants to startups during their first two years. TNUFA grants assist businesses in attracting investors through support filing patents, writing business plans, building prototypes, and forging relationships with potential corporate partners. HEZNEK is a government seed fund that co-invests with experienced venture capital funds in risky startups.

The OCS even spawned Israel's thriving venture capital industry through its Yozma program. It launched a $100 million venture capital fund "that invested in ten private limited-partnership venture funds and set up a separate government-managed $20 million venture capital fund that made direct investments." Yozma attracted prominent foreign multinational investors, including Advent of Boston, GAN of France, Daimler-Benz of Germany, and China Venture Management of Taiwan.

Starting with the 1985 Economic Stabilization Plan, which was adopted to address triple-digit inflation, successive Israeli governments embraced fiscal austerity along with privatizing publicly-owned enterprises. Ultimately, this fiscal austerity entailed curtailing expenditure in the face of tax cuts. Israeli governments progressively cut corporate tax rates, from 61% in 1986 to 36% in 1996. Now it stands at 23%. Legislation in 1986 reduced the employer national insurance contribution rate. Since 1985, Israel repeatedly decreased child allowances, income support for those unable to afford basic necessities, and unemployment benefit eligibility. Simultaneously, diminished public health funding forced Israelis to pay more out-of-pocket for medical procedures and, if they could afford it, acquire supplemental insurance plans.

These welfare cuts coincided with drastically declining investment in public capital, from hospitals to transportation infrastructure. Hospital beds per capita plummeted in recent decades. Today, Israel's hospital occupancy rate is the highest in the OECD. This contributed to a decades-long spike in the mortality from infectious diseases rate, now the highest in the OECD. Israel's average mortality from infectious diseases rate between 2013 and 2016 was 73% higher than that of the US, which was the runner-up. Government neglect of roads and public transportation generated extreme traffic congestion despite a low car ownership rate. Meanwhile, impoverished peripheral communities remain isolated from cities offering high-paying jobs. Conversely, for more than two decades, Israel's gross domestic spending on R&D has consistently exceeded that of every other OECD country.

Sacrificing welfare and public capital expenditure to bankroll a high-tech-centered neomercantilist project required widespread pauperization. The World Bank Poverty and Inequality Platform exposes Israeli poverty through its "share of population living on less than $10 a day" data, which is "adjusted for inflation and for differences in the cost of living between countries." In 2017, the Israeli figure was 9.50%, compared with 2.75% in the US, 1.79% in the UK, 1.15% in Sweden, and 0.75% in Germany. Even in Hungary, only 8.57% of the population lived on less than $10 a day. Israel's National Insurance Institute published on 12 January 2023 its "Report on the Dimensions of Poverty and Income Inequality - 2021." It calculated that 21% of Israeli citizens and 28% of children live in poverty. Simultaneously, the NGO Latet, which operates Israel's leading food bank, reported that 19.1% of Israeli children live in severe food insecurity.

The National Insurance Institute report recorded massive income inequality across Israel's six administrative districts. In the Central District, the main beneficiary of Israel's high-tech-driven economic boom, only 12.0% of residents and 14.4% of children live in poverty, whereas the Jerusalem District's figures are 39.9% and 49.0% respectively. The OECD's last comprehensive survey of Israel's economy, which was published in September 2020, found that the share of workers in poverty "increased significantly over the past 20 years" and now ranks among the highest of its member countries. It concluded, "The business tax system provides large benefits to internationally competitive and high-tech firms. This preferential treatment should be reviewed with a view to better targeting the scheme to ensure net benefits to society and reduced distortions." In fact, this overinvestment in the high-tech sector corresponded with a growing gap between Israeli labor productivity and that of the G7 countries.

To prevent future electoral majorities from obstructing their neomercantilist project, its architects engineered a "constitutional revolution" granting the Supreme Court judicial review. They furtively inserted into two bills, Basic Law: Freedom of Occupation and Basic Law: Human Dignity and Freedom, a clause intended to ratify judicial review. Not recognizing these statutes' constitutional implications, few of the 120 Knesset members even bothered voting. The first passed 23-0 on 3 May 1992 and the second 32-21 on 17 March 1992. Ran Hirschl calculated, out of the thirty-two who voted for Basic Law: Human Dignity and Freedom, "twenty-five voted consistently for the privatization of various public services, including the commodification of Israel's health, telecommunication, electronic media, and banking services." The then Knesset Constitution, Law, and Justice Committee Chairman Uriel Lynn retired from politics later in 1992 and was subsequently elected President of the Tel Aviv & Central Israel Chamber of Commerce as well as the Federation of Israeli Chambers of Commerce.

Future Supreme Court President Aharon Barak declared in an 18 May 1992 speech at Haifa University that the Knesset unwittingly surrendered its constitutional supremacy by enacting those two Basic Laws. He based this assertion on the aforementioned "furtive clause" inserted into each statute. It reads: "There shall be no violation of rights under this Basic Law except by a law befitting the values of the State of Israel, enacted for a proper purpose, and to an extent no greater than is required." Relying on this clause, Barak boldly claimed,

Not everyone knows this, but recently a revolution has occurred in Israel. I am speaking of a constitutional revolution... A Knesset law may no longer infringe the basic rights mentioned [in those two statutes], unless it is enacted for a worthy purpose, even then only to the extent necessary, and it fits the values of the state of Israel as a Jewish, democratic state.

Unfortunately, Barak's narrow definition of human dignity resembles Harari's. In the third volume of his Interpretation in Law series, Barak wrote, "Social human rights such as the right to education, to health care, and to social welfare are, of course, very important rights, but they are not, so it seems, part of 'human dignity.'"

Numerous Supreme Court rulings reflect this narrow definition. A 2005 decision upheld legislation drastically cutting income support. The plaintiffs in Commitment to Peace and Social Justice Association v. Minister of Finance claimed "their human dignity was damaged" because "the cut in income support benefits, combined with recent reductions in child benefit rates and rent assistance, place[d] their recipients far below the 'poverty line,' and allow only a cramped and depressing physical existence." Writing for the majority, Barak opined,

The duty of the state according to the Basic Law: Human Dignity and Freedom derives from the obligation to maintain a system that will guarantee a "safety net" for the underprivileged in society, so that their material situation will not result in any existential shortage. In this framework, it must ensure that a person has enough food and drink for his subsistence; a place of residence, where he can exercise his privacy and his family life and shelter from the elements; bearable sanitary conditions and health services, which will guarantee him access to the capabilities of modern medicine.

Accordingly, the Supreme Court ruled the income support cuts constitutional because the plaintiffs' "depressing physical existence" did not threaten their subsistence.

Victoria Israeli v. The Committee for Expanding the Health Basket (2006) demonstrated that "access to the capabilities of modern medicine" is not an inalienable right. The plaintiff needed a cochlear implant to prevent deafness, but could not afford the 70% patient copayment. Arguing that "hearing is essential for the dignity of those going deaf," Israeli petitioned that "an adult with bilateral deafness that cannot be restored by hearing aids... be exempt from the copayment... or [pay] a reduced fee." The Supreme Court rejected her petition on the grounds that they "do not have sufficient infrastructure to examine this case through constitutional glasses" and therefore rely "on the [Health] Basket Committee's expertise."

Unsurprisingly, Shas Party Chairman Eli Yishai vented in 2006, "The Supreme Court has long since lost touch with reality and makes decisions that are not humane." Shas represents poorer Mizrahi Jews and supports a comprehensive welfare state. Its 2022 coalition agreement with Likud calls for broadly expanding Israel's social safety net. Provisions include boosting the negative income tax for low-paid workers, raising grants per child for poor working families, investing more than $1.6 billion in improving health services (particularly in poorer districts), allocating at least $280 million/year for rechargeable cards used to access "food and essential products required for a dignified life," and increasing public transportation student discounts.

While much analysis focuses on Prime Minister Netanyahu's legal wrangles, the factions pushing hardest for restoring parliamentary sovereignty are Shas, United Torah Judaism, and Religious Zionism as they represent poorer constituencies. Knesset Constitution, Law, and Justice Committee Chairman Simcha Rothman insists social justice necessitates restoring parliamentary sovereignty because "when the court annulled laws in the name of the principle of equality, it almost always did so in order to protect the white Ashkenazi majority from Tel Aviv... They turned the bottom of the barrel of socioeconomic classes into the evil, greedy majority from whom we have to protect ourselves."

Protestors against the judicial reforms mostly come from Israel's economic elite. Bloomberg reported earlier this month that "banks and corporations have excused employees from work to join marches... What is shaking Israel is no youthful anti-establishment movement. It is the top professional classes." High-tech workers facing a coalition intent on redistributing a fraction of the wealth they acquired thanks to colossal corporate welfare constitute the anti-reform movement's most fanatical wing. An informal group called "High Tech Workers Resistance" is divesting billions of dollars from Israel, hoping the threat of economic collapse will force Netanyahu's coalition to abandon judicial reform.

Reform opponents hold rallies every Saturday night in Tel Aviv. Last Saturday, protest organizers invited Yuval Noah Harari to address the crowd. He told attendees, "When the Supreme Court strikes down a tyrannical law, then the security forces and civil service workers are obligated to support the Supreme Court and not obey the government." Apparently, the economic elite opposing parliamentary sovereignty no longer bothers hiding that it prefers oligarchy to a democratic government elected by Israel's "useless class."

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