Barry Topf

Forget Poland and Hungary

Opponents  of the coalition’s campaign to attain political control of the judicial system have rightly pointed to the examples of Hungary, Poland, and other illiberal democracies -countries which Fareed Zakaria defined as  “democratically elected regimes …that ignore the constitutional limits of their power and deprive their citizens of basic rights and liberties”. Moreover, they often deteriorate into autocracies or  “soft dictatorships”. Their economic performance  weakens, and their citizens pay a high price  in reduced opportunities, higher prices and a reduced standard of living.

Hungary and Poland are often held up as  examples  of what will happen to Israel as a result of the  so-called judicial reforms. That is true as far as it goes, but the relevant example might be much worse- the fate of South Africa under international sanctions.  Economic and other sanctions  were consistently intensified until they were lifted in 1991; they became especially effective in 1986 when South Africa’s most important trading partners (the USA, the EC, and Japan) imposed economic sanctions.

Israel’s actions internationally and domestically could spur calls for sanctions.   Inflammatory statements by senior ministers and  actions which violate individual and minority rights could provoke calls for sanctions. Israel has long been accused of violating international law and has already been diplomatically rebuked even by the United States for legislation such as the “Chomesh law” (rescinding parts of the withdrawal from Northern Samaria). Although the imposition of mandatory multilateral sanctions is not likely (yet), individual countries or groups of countries could act on their own.

There is no universal agreement regarding how effective sanctions are, but there is no doubt that they  damage an economy- the only question is how damaging they will be. If they are imposed on Israel, they will be exceedingly harmful, as Israel’s economy is especially vulnerable to sanctions, certainly compared to South Africa.

Israel’s economy is small and very open,  with  many vital links with the world- in trade, in finance, in almost every sector of the economy. It is not self -sufficient, dependent on  vital imports of raw material, energy, food, arms,   and manufactured goods – including components for its own exports.

Israel’s prosperity is based on exports, and exports are very vulnerable to sanctions, official or unofficial.  Foreign direct investment is vital, and if it is  reduced , growth and prosperity will be damaged, perhaps irreversibly.  Israel has few natural resources. Israel’s economic  assets- technology, skills, entrepreneurship- are highly mobile, and if the economic climate worsens, they can easily move overseas, unlike South Africa’s  diamond  and gold mines.

Sanctions on Israel will be easy to enforce and difficult to evade.  Israel’s borders are closely  watched; its neighbors unlikely to extend any assistance, and points of entry- ports and borders-  few and easily controlled. Unlike Poland and Hungary, Israel is not a member of a supra-national organization like the EU and does not enjoy whatever protections that can provide. Israel could be suspended from important international organizations such as the World Health Organization(WHO), the International Labor  Organization (ILO)and other important bodies.

In addition to formal sanctions, the  government’s actions are likely to intensify non-governmental efforts as well. Irresponsible and inflammatory  statements and actions by the government and its senior ministers are sure to encourage, and provide ammunition  to BDS (Boycott, Disinvest, Sanction) and other anti-Israel actors, which will be difficult to counter. There have been many reports of local efforts to boycott Israeli products, and the government has had to struggle  to minimize the impact of EU and other governments’ efforts to impose restrictions, labeling requirements, and other obstacles to Israeli commerce.

Israel has already had to contend with efforts to interfere with its crucial economic activities: in 2021  Google and Amazon employees protested and tried to block  the supply of vital services to the Israeli government. Many professional organizations have also adopted sanctions; in the United States  The Modern Language Association and American Studies Association were two groups that voted to boycott Israel. There are ceaseless efforts on college campuses  to adopt academic  boycotts of Israel. Even if these efforts don’t bear fruit directly, they contribute to a hostile environment which will impact the economy adversely.

Nor will sanctions necessarily be limited to the economy. Sports and cultural boycotts have an impact of their own. Most worrisome, many legal experts have warned that the loss of judicial independence could imperil the international standing of Israel’s courts and legal system. That status has repeatedly protected  Israel from international legal sanctions, including possible prosecution from the International Criminal Court (ICC) , and International Court of Justice (ICJ), which have already initiated proceedings.  The economic cost would be huge; the psychological  and social damage immense, the diplomatic damage huge.

After thriving  in the face of decades of the Arab Boycott of Israel, we are  in danger of bringing a much worse situation on ourselves due to our own foolhardy actions. In assessing the damage the current so-called judicial reforms will inflict on Israel, we should learn  from many examples, including that of sanctions imposed on South Africa. The conclusions are grim.

About the Author
Barry Topf was a member of the Bank of Israel’s senior Management from 2001 until 2013. He was a member of the Monetary Policy Committee in 2011-2013. As a consultant for multinational organizations, he has advised more than 25 countries on macroeconomic and monetary policy.
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