Attack the Israeli political system and no one will disagree with you. While all but a few loonies agree that democracy (pretty much any democracy) is preferable to dictatorship (of any sort) most people who bother to voice an opinion will tell you that the Israeli proprtional representation system is flawed.
All political systems are flawed, presumably because human beings are flawed, and democracies, whichever mechanism they use to take decisions, have flaws that reflect the different methods they use.
In ancient Athens everyone gathered in a stadium and the majority of decisions were taken using a one man one vote system. If you ignore the fact that women, slaves and children didn't vote it was still problematic because large groups of people are prone to behave like football fans and get over excited or follow demagogues. This way makes it hard to take quick decisions or deal with the kind of society where everybody has to work: you need slaves and wives who can free you to spend all day hanging out in the stadium voting and watching football.
Most of the people who don't like the Israeli system want Israel to be more like other countries and these people tend to assume that if we use another countries political system then we will be more like that country, for example if Israel had a presidential system then we would have a seat on the security council and could bomb Iraq and Iran at will. The truth is we would still be a two bit little country that pisses the hell out of everyone else and just because Netanyahu is called "Mr President" wont turn him into Ben-Gurion or Clintonת.
In fact the US system has major problems. The men who designed it, back in 1776, were trying to ensure no dictators took over and they made the country virtually ungovernable with two parliaments (congress and the senate), a president and supreme court none of which can take orders from the other. The result 225 years later is that it is impossible to give the Americans decent health care or stop them buying guns. In addition the US system of directlly electing the president means that the country is periodically ruled by men like George Bush who, if he were given countrol of a small country with many enemies, could cause a major disaster.
British Jews like say, Bernard Lewis, naturally prefer a system like Britain's. According to the British Daily Telegraph this week, Israel's electoral system is a major barrier to Middle East peace. Presumably they prefer the Syrian system where 99.9% vote for one party. In this case the assumption is that if we make each member of Knesset represent a constituency then things would improve. Members of Knesset would address each other as "the honourable member for Umm El-Fahm north", instead of having 120 seats in the Knesset one would have about 60 and it would always look full (the British parliament has 646 members fighting for 440 available places to sit), we would have a seat on the security council and could rule India and most of the Middle East without actually having to have the natives in Parliament. Ideally we would also play more cricket.
The advantage of the British system is that (like in Israel) the elected representatives control who is the prime minister, so George Bush is unlikely to get elected or stay in power. On the other hand a poorly educated, unelected and very rich elderly woman (eg the Queen) actually decides which memeber of parliament should be the prime minister and the British have a second parliament full of unelected "lords" whose great-great-grandmother had an affair with the monarch resulting in great-great-grand daddy getting a nice piece of turf to play cricket on. Oh and grandpa had extensive slave plantations in the Carribean and ruled Kenya. I guess in Israel a House of Lords would be full of retired generals, ex-members of knesset, rabbis and businessman who paid for the privelege (as they do in Britain). It hardly sounds like a great deal.
In Britain people have been trying for years to change the system which makes it impossible for anybody except members of the two main parties to get elected. 40% of Britons don't bother to vote (turnout is lower then in Israel) and many of the votes of those who do bother don't count. British governments get huge majorities although in practice only a minority of the population has voted for them. One side effect of this is that every ten years the British elect a government who spends the next decade undoing everything their predecessors did and that's how the country looks. Its hardly a great success.
Naturally most of the people who want Israel's system to change are anglo-saxons. They want Israel to be more like home and assume that because their system has worked for a long time it is a great model. Since the war the Germans have had a great system, half proportional representation and half constituencies, but for some reason nobody wants a democracy like Germany. Ironically nobody suggests we use the Dutch system which has been in use since 1917 (Holland is one of the world's oldest democracies). There is a good reason for that: the system we use IS the Dutch system and nobody thinks there's anything wrong with Holland's democracy.
In my opinion there are two points being missed here. Firstly the British and American systems have evolved over time and are not simply the result of a great piece of constitutional engineering and secondly, the Israeli system is pretty good. Basically there are no magic solutions to the Israeli political system (or for that matter to the conflict with the Palestinians).
The British system has evolved over time. Britain has no constitution and the system is a mixture of tradition and continual fine adjusting, the society has evolved with the system and the two are matched. Changes are made gradually and carefully and that, in my opinion, is how things should be done. In 1996 a radical attempt at reform was made in Israel by having Prime Ministers directly elected to "reduce the bargaining power of small parties". What happened was the opposite, voters chose a Prime Minister they wanted and then were free to vote for their particular special interest party. So not only was the system undermined, the result was the opposite of the intention. Overnight the main two parties lost about a third of their vote. The new system was abandoned but the parties have never recovered. The number of special interest parties multiplied and that is the way the system remains. I am optimistic that the situation will return to what it was over the next few elections, but as you can see change takes decades to take effect, people do not change overnight just because the method of election changes overnight.
Although the American system was designed by a few old men, it has been subject to continual gentle adjusting (constitutional amendments) and no radical changes. Society and electoral system have evolved together and the democratic system, for all its flaws, is highly stable.
The Israeli system is not nearly as bad as it is portrayed. Israeli governments were dominated by the Labour party for twenty five years and over the sixty odd years of Israel's existence it has arguably beem more stable then most countries. The National Religious Party was part of coalitions for decades and Shas has been in most governments over the last twenty five years. Israel has survived continual war, mass emmigration and terror with little damage to democracy. I doubt Britain could survive that long without the collapse of democracy. The Israeli system has been able to rapidly adjust to the fast changing structure of society. The one million Russians who migrated in 1991 are today representated by the 12 seats of Lieberman. Incidentally Russians also want Israel to be more like Russia. Unlike the anglo-saxons who want their election system emulated, Russians have no such desire (obviously Russian democracy is no great shakes) but many would like us to handle Gaza the way the Russians handle Chechnya. They too, presumably, think that behaving like Russia will lead to a seat on the security council, a sputnik and the right to invade Afghanistan.
In a country at war decisions need to be made by consensus and that is what happens in Israel. Most major sections of society are represented in the Knesset and their opinions brought to bear when making decisions. It isn't easy but it shouldn't be. We all need to agree before we make major changes and our society is composed of some radically different segments.
Finally one should note that the Israeli system was not invented in 1948. It started in 1920 (one could argue that Israel is one of the world's longest standing democracies), when the Yishuv in "Palestine" (as the British called it) created a council to manage its affairs and raise and allocate funds. This was in accordance with the terms of the League of Nations Mandate for Palestine and from 1928 the British recognized the authority of the "Vaad Leumi" (National Committee). They chose proportional system as a fair way of establishing the relative strengths of parties with radically different agendas. It is also the same system used by the World Zionist Organization, which held its first elections in about 1900 and, until 1939 had more members then the Yishuv.
In 1948 there was no need to develop new democratic institutions: everything was in place. The Israeli political system has quite literally evolved with the society and state and it is a terribly dangerous ploy to try and radically redesign such an effective time-tested system. A bit like having a heart transplant. You only do things like that if the patient is terminally ill.
If we need to make fine adjustments to the Israeli political system, what should we do?
Well at present you need a low minimum of votes (threshold) to get a party elected: the equivalent of two seats. That should be doubled.so that you need the a minimual support of four seats to get elected (in Germany the figure is 5%). I say that despite being a supporter of the Green Movement which I am sure will, for the first time, scrape into the Knesset in the next elections (it may do better).