AI
Prof. Sam Lehman-Wilzig – Israel’s Populism and Economic Health? More Like Oil and Water
Is Israel an unusual democracy? In one important respect, no. Its evolution over the past few years follows a path “pioneered” by several others. In a word (actually two), it’s been moving towards “illiberal democracy” in which formal elections are held, but most other institutions (media, judiciary, regulatory) are neutralized or taken over by the executive. To be sure, there has been fierce opposition to the present government’s push in that direction. That makes the Oct. 27 election arguably the most critical it has ever faced.
This is not merely a matter of political style – the strengthening of the executive branch at the expense of the legislative and judicial, or even undermining basic civil rights. It also (or perhaps especially) constitutes a direct threat to the foundations of the country’s economy.
To understand how and why, it’s worth looking at a recent example of what transpired in an illiberal democracy: Hungary. After sixteen years in power, Victor Orban managed (“undermanaged” would be a better word) to turn Hungary’s economy from solid growth when he took power to one of the poorest countries in the entire European Union. Indeed, during his last year leading the government, the country’s economic growth was an anemic 0.4% – with unemployment running at a 10-year high.
The reason? Serious corruption. In fact, Transparency International (an anti-graft watchdog), ranked Hungary (along with Bulgaria) as 2025’s most corrupt E.U. country. It is here that the “populist paradox” comes into play, because Orban came to power campaigning against corruption! How to explain this?
Once in power, populist leaders slowly undercut institutions that are designed to guard against corruption, because those institutions form a bulwark against the leader’s usurping other forms of institutional authority. Gradually, the political system overly empowers the Executive Branch. Such unrestrained power then leads to further systematic dismantling of the rule of law, in an ever-increasing cycle of institutional weakening and executive leader empowerment. In such a distorted milieu, politics becomes more important than economic considerations; the latter pays the price – figuratively and literally.
In Orban’s Hungary, government contracts went to companies based on political loyalty, not economic efficiency related to cost and experience. Worse, with the courts neutered because he stacked them with cronies, and formerly independent government regulatory agencies populated with loyalists, the system didn’t have any meaningful oversight. And by taking control of media outlets, there was little feedback regarding such economically harmful actions.
How harmful? One last statistic: in the decade before Orban’s first election, Hungary’s economic growth averaged 2%. In his first decade in power, that decreased to 1%; in the 2020’s it averaged only 0.2%.
Perhaps this “populist paradox” isn’t a paradox at all but rather a “populist plan” from the start. First candidates promise to fight corruption, “draining the swamp”; but once in power they claim that this can only be done with increased authority and weakening of the “deep state” that stands in the way of the leader carrying out his/her mandate.
Hungary is not alone. Much the same “plan” was followed by Jair Bolsonaro in Brazil, as well as Rodrigo Duterte in the Philippines. In both those cases, the economy tanked and the leaders were either voted out of office (Bolsonaro) or ended up in jail (Duterte) – but not until their respective economies suffered serious damage.
Which leads to the United States – and Israel too. Orban inspired President Trump, directly influencing Project 2025, Trump’s blueprint (written by the ultra-conservative Heritage Foundation) for radically restructuring the U.S. government, including taking direct control of independent government agencies. Overall, this has not yet worked too well, mainly because the U.S. judiciary is by and large constitutionally independent of political control. But Trump’s unprecedented threats several months ago against the Federal Reserve (sending the Department of Justice to investigate “building irregularities”), even threatening to fire the Fed’s Chairman Jerome Powell, show how hell bent he’s been on pushing his version of illiberal democracy.
And Israel? Here too the “smoking gun” can be found in the government’s Judicial Reform/Revolution. Such undermining of the courts – especially the Supreme Court in its function as the High Court of Justice to decide on the limits of government authority – was the clearest sign of PM Netanyahu’s intent in this regard. There’s an historical irony here: the Likud came to power back in 1977 precisely because of the rampant corruption of several Mapai (Labor) politicos. But as Britain’s Lord Acton put it back in the 19th century: “Power tends to corrupt, and absolute power corrupts absolutely.”
The good news is that at some point Orban, Bolsonaro, and Duterte were stopped from continuing in office. Trump won’t leave office until early 2029 (although there are calls to carry out the 25th Amendment by declaring him unfit for office). And Bibi? The upcoming election – not to mention his ongoing trial for corruption – will go a long way to determining whether Israel continues along the illiberal democracy path and eventual economic ruin, or the country stops at the precipice and returns to a relatively normal, functioning democracy with a healthy economic future.
