The impasse over Prime Minister Benjamin Netanyahu’s judicial reforms is, as much of Israeli public life, existential. Bibi’s new law, the first plank of which prohibits the Israeli Supreme Court from determining if elected officials’ decisions are “reasonable“, has sparked dissent in practically every major institution in Israeli society: the media, the courts, government, the civil service, and the military. And Netanyahu is not done yet. He’s promised several more reforms, including changes to the judicial appointments process and the adoption of a notwithstanding clause modelled on Canada’s s. 33.

To opponents, Netanyahu’s reforms will neuter a court that has served as a critical moderating influence. They fear that the reforms will mean further entrenchment of government subsidies and exemptions from military duty for Israel’s ultra-Orthodox. They also worry about formal annexation of the West Bank and its Palestinian population. A truism for many Israelis is that Israel can only be two of three things: Jewish, democratic, and a territory. Opponents say that weakening the court will jettison Israel’s democratic nature. 

To their proponents, on the other hand, the reforms are an important corrective to a court that has arrogantly overturned laws and vitiated government appointments that had majoritarian support, and which in fairly recent history allotted itself a toolbox of powers that would make most other Western democracies blush—including the reasonableness doctrine that Netanyahu’s government repealed.

Adding to the general chaos is the fact that Israel lacks a single written constitution—something that was tabled and rejected by the country’s founders due to the fractious nature of the population and the supervening imperative of establishing a state in the first place. It has instead the so-called Basic Laws, quasi-constitutional statutes passed by a simple majority of the Israeli parliament. The primacy of Basic Laws over ordinary statutes is highly contested.

This does not, however, mean that Israel has no founding texts that outline basic rights and provide evidence of a consensus political culture. Israel does have a Declaration of Independence. 

This Declaration is the subject of an important new book, Israel’s Declaration of Independence: The History and Political Theory of the Nation’s Founding Moment by Neil Rogachevsky and Dov Zigler. The book is the first comprehensive English-language analysis of the text and its originating drafts and it couldn’t have landed at a better time.

The text that Israel’s founding Prime Minister David Ben-Gurion proclaimed at the Tel Aviv Museum in 1948 begins with a declaration of founding:

By virtue of our natural and historic right and on the strength of the Resolution of the United Nations General Assembly, [We] hereby declare the establishment of a Jewish State in Eretz-Israel, to be known as the State of Israel.

It goes on to enumerate the new nation’s political ideals and the outlines of its basic guaranteed rights, explicitly connecting these to Biblical history:

The State of Israel… will be based on freedom, justice and peace as envisaged by the prophets of Israel; it will ensure complete equality of social and political rights to all its inhabitants irrespective of religion, race or sex; it will guarantee freedom of religion, conscience, language, education and culture; it will safeguard the Holy Places of all religions; and it will be faithful to the principles of the Charter of the United Nations.

The Declaration was uttered on May 14, 1948, at 4:00 p.m., eight hours before the expiry of the British Mandate under the shadow of near-certain invasion by Israel’s neighbouring Arab states. It represented the first foray of an ancient nation onto the world stage of modern politics (and the first Jewish state since the fall of the Judean Kingdom in 133 CE); ensuring “the natural right of the Jewish people to be masters of their own fate, like all other nations, in their own sovereign State” while also guaranteeing the rights of minorities—even those with whom they were at war.

The declaration contains references both to the Jewish people’s connection to the land of Israel and the historical right following centuries of genocide and expulsion, most recently being, “the catastrophe which recently befell the Jewish people”, the Nazi Holocaust. 

In the book, Rogachevsky and Zigler trace how the modern nation of Israel settled on a Declaration that affirmed the nation would be democratic, rights-protecting, and Jewish. The book starts with the draft of U.K.-trained Tel Aviv lawyer Mordecai Beham. Overwhelmed by the gravitas of the task before him, Beham consulted with an erudite rabbi from Cleveland named Shalom Tzvi Davidowitz and ended up with a first draft that incorporated Deuteronomy, the spirit of the American Revolution, some principles of the rule of law from the English Bill of Rights, as well as language from the United Nations Resolution 181, which was passed by the General Assembly in November 1947, and which called for a Jewish state, an Arab state, and an internationally-administered city of Jerusalem in Palestine.

Later drafts by Tzvi Berenson, legal advisor to the Histadrut labour union, altered Beham’s version beyond recognition. Berenson’s draft channeled the Labour Zionist A.D. Gordon’s philosophy, which emphasizes state legitimacy based on delivering material progress to its people rather than the rights of the individual. Berenson’s draft declared the founding “by right of the unbroken historical and traditional connection of the people of Israel to the land of Israel, and by right of the labor and sacrifice of the pioneers.” This formulation would not make it into the final draft, instead, Ben Gurion would declare independence “by virtue of our natural and historical right.”

Rogachevsky and Zigler focus on the political theory implied by the Declaration. They note the significance of a late amendment to the draft made by Ben-Gurion, who changed the Declaration’s wording from proclaiming that the state would “bestow rights” to “ensure rights”. This is important because, in the tradition of Lockean natural law, Ben-Gurion claimed that rights properly “belong to the people” and are not mere inventions of the state. In his view, rights “bestowed” by the state may just as easily be stripped by the state.

Surprisingly, the final text did not include the word “democracy”, though the authors suggest too much has been made of this. The word had been included in most of the drafts leading up to the final text and was deleted by politician (and future prime minister) Moshe Sharett. Perhaps, the authors suggest, because it is clear throughout that the document was declaring the independence of both a procedurally democratic state (there would be voting) and a substantive democracy as well (there would be equal protection of rights), and perhaps because time was so short, this was simply not discussed.

Less surprisingly, the debates over religion’s place in the text remained controversial amongst members of the provisional government in the final days before the Declaration. Aharon Zisling, an ardent secularist, objected to the invocation of the “the Rock of Israel” (Tzur Yisrael), while more religious drafters argued for reference to a “God of Israel” and, more broadly, a theological justification for the state. Ben Gurion’s last words on the matter were an exemplar of political diplomacy and brilliance but foreshadowed the strife that would ensue on the question of Israel’s Jewishness and this latter’s political import:

“I know what the Tzur Israel that I have faith in is. Surely my friend on the Right knows what he believes, and I also know how my friend on the other side believes in it.”

Much of Israel’s political history has been characterized by such exigencies—the decision to avoid gridlock over debating a written constitution, crystallizing what the precise nature of Israel’s Jewish character entailed, even omitting to spell out the democratic nature of the state that was clearly envisioned by its drafters. Israel’s early architects well understood the overriding imperative to, in Ben-Gurion’s words, “determine political reality.”

The Declaration has ricocheted throughout contemporary Israeli history and was directly influential in the crafting of the Basic Laws. Justice Aharon Barak, who shepherded Israel’s judicial renaissance from a meeker procedural court to one of the most interventionist high courts in the world, recently took to the pages of Israel’s main Left-leaning daily Ha’aretz to urge the adoption of a written constitution, “based on the values of Israel’s Declaration of Independence as a Jewish and democratic state.” According to Barak,  “These values are the values of heritage and Zionism on the one hand and the values of human rights and the rule of law on the other.”

It’s difficult to see how Israel could settle on a written constitution amid the current turmoil. Israel’s Supreme Court is currently preparing to hear submissions in mid-September rejecting the constitutionality of Netanyahu’s first plank of judicial reforms, the repeal of the Court’s ability to overturn ministerial decisions based on unreasonableness. If the Court invalidates the reforms, as it is widely rumoured to be inclined to do, it’s difficult to see how Israeli society will recover from the crisis.

Then again, Zigler and Rogachevsky’s book is a reminder of the rich history of the common meaning of Israel, and the warrior nation’s scrappy ability to prevail through even the most fraught of circumstances. If Israel pulls through, it may be because there is still enough to unite the nation as there was when Ben-Gurion spoke at the Tel Aviv Museum in 1948. 

Mike Moffat deserves congratulations for serving up some innovative and impactful policy ideas to address Canada’s gaping housing shortage. The federal cabinet would do well to zero in on his suggestions when he briefs them in Charlottetown this week for what is being billed as an important confab on the country’s housing “crisis.” The key point that government ministers need to hear more from Moffat on is reintroducing accelerated depreciation rates for rental housing. Government cannot and should not try to “solve” the housing shortage on its own. Large pools of private capital need to be attracted back into building rental housing and currently the incentives do not exist for this to happen on any meaningful scale.

What is striking about Moffat’s essay and much of the current conversation about housing is the relentless focus on increasing supply. It is as if the issue of housing demand has been erased from policymakers’ minds when it comes to tackling what has been rightly identified as one of the most complex and important issues facing the country.

Take immigration. Right now in Ontario we are adding every two years the population of Mississauga and building a city roughly equivalent in size to Cornwall. To state the obvious, this is completely unsustainable and likely unfixable in any reasonable period of time that voters could and should expect. Yet we know that returning immigration levels, and student and temporary worker visas, back to the twenty-year average of 300,000 people—versus the one million plus arrivals in the last twelve months—would have an immediate and salutatory effect on demand.

Immigration’s impact on housing looks like a live debate going into the cabinet meeting with the new housing minister (and former immigration minister) Sean Fraser publicly musing about putting a cap on the “explosive growth” of international student enrolments.

Let’s hope this is where government ultimately end ups or acknowledging the impact of record population growth on shelter costs. After all, expectations about the future matter as price signals in the here and now. They give buyers and sellers clues as to the direction of travel of a market, in this case, housing. Indicating to the market that demand via population growth will be slower for the foreseeable future would lower shelter prices today and is an easy win. 

Immigration of course is a sensitive issue that has many dimensions beyond economics and housing. But to argue that Canada wasn’t becoming more diverse and inclusive at annual migration levels a quarter of what they are today is preposterous. Also, migration isn’t the weather. It is a choice. It can be expanded or lowered according to the absorptive capacity of society. Right now that capacity, in terms of not only housing but a variety of other metrics such as health care and public infrastructure, is clearly beyond reasonable limits.

Missing also from the current discussion is some much-needed soul-searching about the role the federal government has played recently in stoking housing demand, and its corollary, a crisis of affordability. Much of the pandemic-era rise in shelter costs has its origins in a little-known mechanism called the Domestic Stability Buffer. This is the amount of capital that banks are required by the Office of the Superintendent of Financial Institutions to set aside to cover losses in the advent of a Black Swan-type event.

In the Spring of 2022, OSFI cut the DSB from 2.25 to 1 percent, providing Canada’s banks with a massive $300B in new lending capacity or 15 percent of total annual GDP. These funds overwhelming went into residential mortgage origination during the same period the Bank of Canada was slashing its overnight rate and pushing down borrowing cost by buying bonds hand over fist. The combustion of hundreds of billions in new capital and ultra-low rates explains much of the unprecedented runup in prices with average homes nationally now costing as much as average homes in Toronto in 2019. Think on that for a moment… 

As with immigration levels, OSFI made a policy choice. Some or all of the $300B in new lending capacity created out of thin air could have been mandated for corporate loans to create private sector jobs or fund new capital investment. But it wasn’t. Instead, OSFI joined the alphabet soup of other Ottawa financial organizations (CMHC, FCAC, etc.) and added to a policy environment already highly favourable to increasing shelter costs.

Part of this week’s cabinet deliberations should be a root-and-branch review of federal policy as it relates to the financialization of housing as an asset. What schemes genuinely help lower-income Canadians get into homes and rental accommodation? Which are in fact subsidies to higher-income Canadians, investors, the banks, and the real estate sector as a whole? Proof point: in what world does it make sense to have over forty percent of residential units in Ontario “investor-owned”, with some communities such as Windsor, Sudbury, and St. Catherines seeing that level approach 80 percent or more?

Here the biggest tool the federal government wields to increase housing affordability is the capital gains exemption on Canadians’ primary residences.

When this policy was instituted in 1971 it was never envisioned as applying to the housing market with an average home price at ten times the average national income. Nor was it meant to shelter millions of dollars of capital gains in luxury home sales in Canada’s major cities for the 1 percent. We need to have an adult conversation about this exemption. Is it really still in our national interest? Beyond its effect on shelter costs, are we OK with the large intergenerational wealth transfers it is increasingly facilitating? Transfers that allow the children of high-income families to “afford” housing in our largest cities, through nothing other than their birth, and price out the less fortunate. One-third of people don’t own a home, and don’t benefit from the subsidy—many not out of choice.

The cautionary tale for not using all the tools at our disposal to address our national housing crisis is what is happening right now to real estate in China.

The Chinese also took housing to their largest asset class by far and trebled, like Canada, over a generation, its contribution to GDP. They used similar tools such as cheap credit from government via the banking sector and tax subsidies to individuals and corporations to engineer a massive explosion of real-estate-related wealth.

Their entire real-estate-led economic growth model has hit a wall. High prices slowed family formation. Ever higher debt levels curbed purchases. The real-estate portion of Chinese GDP is now falling precipitously, and it seems Beijing has few if any tools left to prevent a deep recession that could end up structurally damaging their economy.

Canada has all the same raw ingredients to replicate the toxic housing and real-estate endgame China now faces. The stakes are high. We need bold action and yes there is a case for increasing housing supply. But let’s also think about the policy levers that we have to sensibly curtail demand and unwind the financialization of housing as an asset class. Both are factors that China’s experience indicates can quickly flip an unaffordability crisis into long-term, intractable economic malaise.  For all our sakes let’s hope the policy deliberations needed to avoid this “own goal” begin this week in Charlottetown.