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Sailing Away from the North Star: The Judicial Coup Defies Economic Reason

A Coup in Review

October 5, 2023

Bank of Israel. Photograph by Yossi Zamir, Shatil Stock

The Organization for Economic Development (OECD) often serves as a guiding star for nations seeking the right economic direction. This week, evidence suggests that Israel's current coalition's trajectory, especially concerning the judicial coup, deviates sharply from OECD's recommended path.

The OECD recently unveiled its 2023 "Going for Growth" report (available here), offering tailored recommendations for each member nation based on 2022 statistics. For Israel, the report prescribes how governmental economic and social policies should be shaped to spur long-term sustainable growth.

Israel's tech industry remains its primary economic driver and is anticipated to stay dominant. Recognizing this, the OECD emphasizes the importance of integrating severely underrepresented groups, namely the ultra-orthodox and Israeli Arabs, into this sector. Currently, the OECD indicates considerable disparities in digital literacy across Israeli populations. The current government has shown little initiative towards decreasing disparities.

The OECD advises cutting subsidies for Yeshiva students and tying child daycare support to employment. In stark contrast, the coalition has been increasing financial support for thousands of ultra-orthodox households that remain economically inactive.

Contrary to the OECD's guidance, the present treasury minister, Bezalel Smotrich, has attempted to curtail budgets designated for advancing education within Arab local authorities.

Most alarmingly, Israel ranks second globally for gender wage disparities, trailing only behind South Korea. The persistent decline in gender equality and in the deterioration of women’s legal rights exacerbates this wage gap, yet the government seems indifferent..

Complicating matters further, the term of Professor Amir Yaron, the present chancellor of the Bank of Israel, is nearing its end. Yaron, who has openly criticized the judicial coup, may not be reappointed. The reluctance of Netanyahu, who initially selected Yaron, to comment on the matter has raised eyebrows. Yaron has insinuated that he might resign if the government persists on its current trajectory.

According to the OECD, Israel boasts a commendable investment in research and development. Foreign investments in the tech sector waned with the onset of the judicial coup, but indications of stabilization are emerging. This could change in an instant. The role of the Bank of Israel's chancellor is pivotal in overseeing and counterbalancing the executive branch’s economic policies. Should this post be occupied by someone perceived as a puppet of the present administration, the ramifications for Israel's economy could be severe.


Dr. Ido Baum is the legal commentator of the daily newspaper TheMarker. He is an associate professor of law at the Haim Striks Law Faculty at the College of Management in Israel and heads the Louis Brandeis Institute for Society, Economy, and Democracy. He is also a contributor to USA for Israeli Democracy.


April 28, 2024

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