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by Professor Paul Eidelberg


Despite the trappings of democracy -- universal suffrage and periodic multiparty elections -- the people of Israel have virtually no influence on government policies. The Government, consisting of party leaders, has rendered Israel's parliament, the Knesset, a mere cipher. Why is this so?

Voters in Israel cast their ballots not for individual Knesset members but for a party slate. Since a Knesset member owes his position to his party and not to the votes of constituents, he cannot judge the Government's policies as do legislators in all democratic systems of government. This inhibits him from blocking Government policies he deems unwise or pernicious. If he votes against the head of his party he would be committing political suicide. (This is why Knesset votes of no-confidence are exercises in futility.)

Conversely, the citizen has no representative in the Knesset to uphold his interests and convictions vis-á-vis the Government. Once the Government is formed, a Prime Minister can ignore his most solemn campaign pledges with impunity -- as Ariel Sharon did when he adopted Labor's Disengagement policy.

To overcome this undemocratic concentration of political power, members of the Knesset must be individually elected by voters in regional or constituency elections. This will give the voter and his elected representative a degree of power utterly lacking under Israel's present system of government.

This democratization or diffusion of political power must be paralleled by a democratization or diffusion of economic power. The state socialism advocated by Labor boss Amir Peretz still dominates Israel. The Histadrut (the General Federation of Labor), which is dominated by the Labor Party, can grind the country to halt.

The Histadrut is not merely an expanded version of a labor union. It embraces agricultural settlements, cooperative societies, urban workers groups, the Sick Fund, Bank Hapoalim (the "Workers Bank"), schools, cultural organizations, and corporations such as the Solel Boneh construction firm. The Histadrut's all-powerful Executive Committee is formed by a system of indirect elections which render the leadership independent of the rank-and-file, i.e. the worker.

The worker in this socialist system is merely a wage-earner, as he would be under a capitalist economy. Whether he will derive from his labor a "living wage" depends primarily on others. He can no more influence the decisions of the economic elite than of the political elite (which interlock when the Labor Party is in power).

To diffuse economic power, various politicians advocate "privatization." The predominant method of privatization today is first to select state-owned enterprises and then seek out existing investors, whether foreign or domestic, who can afford to purchase assets or shares of these enterprises. However, most people have little or no savings to invest. Unless shares are given away free or at discounts below their fair market value, financing privatization through existing savings pools automatically channels most of the future ownership of these divested enterprises to economically privileged groups or foreign interests. This can recreate the conditions which encourage state domination of the economy. Privatization may thus replace one set of elites with another.

Unless privatization is properly orchestrated, most people will still have to rely for their subsistence exclusively on wages and on other people's income redistributed by government taxation. However, technological advances and the mobility of capital in an increasingly globalized economy can play havoc not only with wage-earners, but with corporations and even nations.

Indeed, "labor saving" technology, together with lower wage markets (for example, Asia ), are now combining to diminish the relative economic value of human labor vis-á-vis capital or the means of production. Thinking computers will increasingly replace people and millions of jobs in many industries and offices. More and more people will find it difficult to gain an adequate income from wages or welfare. (One consequence of this trend, that is, of a "wage-based" economy, is that more and more mothers will have to find work outside the home to make ends meet.)

According to lawyer-economist Norman Kurland, "simply raising [the worker's] wages is often not only impractical, but can be unjust as well... It may force a company to downsize, relocate its operations, or go out of business." To prevent the worsening gap between rich and poor, Kurland proposes structural reform of basic economic institutions (e.g. capital credit, banking, and taxation) to promote economic empowerment and sustainable growth through broad-based capital ownership.

His proposed "Capital Homestead Act," which is addressed to the limitless frontier of high technology, upgrades the wisdom of Lincoln's homestead legislation of 1862, which democratized ownership of America's once abundant but finite land frontier. Among the "social tools" advanced are Employee Stock Ownership Plans (ESOPs). Kurland writes: "Democratizing access to capital credit [to be repaid by future savings and company profits] would enable workers to acquire ownership of income-producing assets in new or expanding or in the divestiture of state-owned or Histadrut-owned enterprises and land. Property income could then supplement income from wages."

Also, faster rates of non-inflationary growth linked to expanded capital ownership would serve to overcome the resistance of (Histadrut) workers who fear that privatization will result in loss of job security, subsidized wages, and other benefits with little or nothing in exchange.

Summing up: democratization in Israel requires a diffusion of both political and economic power. This can be accomplished by a "Political Democracy Act" that makes MKs individually chosen by the voters in constituency elections, and by an "Economic Democracy Act" that enables workers to supplement their wages by income-producing assets.

Prof Paul Eidelberg is President of the Foundation For Constitutional Democracy. He can be reached by mail at 244 Madison Avenue, Suite 427, New York, NY 10016, Tel: 212-372-3752, and by email at He is also a member of the Jewish National Front (Hazit).


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