A special lesson of the May 17 election is that Israel is threatened with the kind of political impotence that brought France to a standstill until it abolished the electoral system of proportional representation.

With all its theoretical virtues, the system has one fatal fault: It generally ends up spawning so many parties that parlimentary government sooner or later breaks down for lack of majority will. That's what France discovered between 1946 and 1958, when the government, based on ephemeral coalitions, fell with depressing regularity. Over 18 parties were competing for power during France's last days of proportional representation.

In Israel, the situation is rapidly approaching the same kind of stalemate: A dozen parties competed in the May 17 election, with the result that no party came close to winning a majority of the 120 seats in the Knesset.

Likud, which ran first by winning 43 seats, cannot form a government except by coalition with several smaller splinter parties, which means a lot of wheeling and dealing. Even then the chances of achieving a stable majority are so slim that new elections may be necessary in the not-too-distant future.

Few Americans have had much experience with proportional representation. Before World War II, several U.S. cities tried the idea, but soon dropped it, for it is not a practical substitute for our two-party system.

There are variations, but in Israel it means each party puts up a slate of candidates for parliament, all of whom run at large. If, for instance, a party gets 50 per cent of the total vote, it is entitled to half the seats; if it gets 25 per cent, it gets a quarter of the seats, and so on.

As an illustration, if America had the proportional-representation system, a George Wallace Party, with 13 per cent of the vote in 1968, would have elected 57 congessmen and 13 senators.

For many years the Israeli system did not pose serious difficulties, for the ruling Labor Party was stronger than all the other parties combined and, hence, could usually run the government without making deals with the splinter parties. That day is over, possibly for good.

In the last three elections, the Labor Party has steadily lost ground. In 1973 it won only 51 seats, 10 short of a majority.

While visiting Israel just after that election, I found widespread interest in ditching proportional representation in favor of the U.S. system of electing members of Congress from various districts throughout the country. Actually the late David Ben-Gurion favored the change long before that.

After the 1973 elections, however, Labor managed to form a relatively stable coalition government and, once back in power, temporarily lost interest in a new electoral system. But now, in the wake of Labor's defeat earlier this month (it won only 32 seats), the party is showing renewed enthusiasm for the proposed reform, as is the new and fast rising Democratic Movement for Change (DMC), which picked up 14 or 15 seats on May 17.

Menachem Begin, leader of the Likud, has 21 days to form a government and, if necessary, he can get a 21 day extension. If he then fails, the president may turn to others to put a government together, which requires a minimum of 61 votes, or he may dissolve parliament and call for new elections.

Begin needs the cooperation of both the DMC and the National Religious Party (12 seats) for a comfortable majority of 70 votes. Without the DMC Likud would be living on borrowed time with a majority so thin that it could lose a vote of confidence at any time and have to face up to new elections.

One possibility is that the DMC might make a limited deal with Begin, perhaps on the understanding that new elections would be held within 18 months, following the elimination of proportional representation and establishment of voting by districts.

If the Labor Party is going to make a comeback, electoral reform would appear to be a promising path, for there is little doubt that it would benefit the major parties while virtually eliminating the flock of small factional parties that now clutter the ballot, fractionalize the vote and make it increasingly difficult to organize a dependable working majority in the Knesset.

Even with the help of electoral reform, Labor is going to have an uphill fight to regain its old standing. "Oriential" community support has been steadily shifting to Likud. Most of the young new voters (over 50,000 a year) come from the Oriental areas. One Labor Party official is quoted as saying, "We underestimated the second Israel."

That was a reference to the country's Sephardic Jews from North Africa and Arab countries of the Middle East. The "Orientals," as they are called, who now compose 52 per cent of the population, are not only poor, but poorly off in political power as well - up to now, that is.

Little wonder that leaders of the Labor Party would welcome a strong revival of immigration from Russia and Europe. Immigration slumped from 55,888 in 1972 to about 20,660 in 1976, a year in which the numberof emigrants actually equaled the number of new arrivals.