Lebanese Economic Crisis

4 Key excerpts on "Lebanese Economic Crisis"

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  The Lebanon Uprising of 2019

  Voices from the Revolution

  • Jeffrey G. Karam, Rima Majed, Jeffrey G. Karam, Rima Majed(Authors)
  • 2022(Publication Date)
  • I.B. Tauris

    (Publisher)

  2 These numbers paint the ongoing crisis as an obituary of the reconstruction process. This relates not only to the collapsed material and financial infrastructure but also to the political choices and their long-term alterations of the socioeconomic structure and internal and foreign relations. It has been widely admitted that the “Lebanese economy is in free fall,” 3 that “the political and economic system has completely fallen,” 4 and that “this state, in its current form, can no longer protect its citizens and provide them with a dignified life.” 5 There is also a consensus that the current crisis far surpasses the domestic economy’s ability to absorb and compensate for the losses on the short term, and that society is not strong enough to withstand its effects on the long run. This discrepancy between the long-term recovery and the short- term resilience of society makes the previous funding mechanisms of consumption, expenditure, and debt settlement impossible. It is the hour of truth. The endlessly sustainable “Lebanese miracle” turned out to be conditioned by factors that are no longer available. The bills that have been accumulated are now due. This is essentially the issue around which events have—and will continue to—unfold, making this crisis one of political economy. The 2019 financial collapse inflicted qualitative and quantitative changes on income and its distribution. Most families were stripped of their purchasing power. By mid- 2021, the Lebanese pound (LBP) had lost more than 90 percent of its value compared to the US Dollar (USD). The Consumption Price Index had risen by 287 percent compared to late 2018, under a relative freeze of nominal wages. In 2020, GDP contracted by over 25 percent, meaning that income (profits and salaries) suffered a great loss. The bulk of the hit targeted the middle class whose consumption had previously been the engine of economic growth.

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  Power-Sharing after Civil War

  Thirty Years since Lebanon’s Taif Agreement

  • John Nagle, Mary-Alice Clancy, John Nagle, Mary-Alice Clancy(Authors)
  • 2021(Publication Date)
  • Routledge

    (Publisher)

  The Causes, Nature, and Effect of the Current Crisis of Lebanese Capitalism

  Hannes Baumann

  ABSTRACT

  Forty years ago, Salim Nasr identified a “crisis of Lebanese capitalism” as a “backdrop” to the country’s civil war. Thirty years after Taif, Lebanese capitalism is facing another crisis: public debt, a looming currency crisis, failing public services. Explanations that focus solely on the sectarian “weak state” or on Syrian refugees neglect the crucial importance of Lebanon’s dependence on Gulf rentierism. Using recent studies of income and poverty, this article shows how postwar capitalism benefited rentier capitalists at the top, created a precarious middle class, and perpetuated poverty. Economic protests mobilize the precarious middle and they revolve around failing public services.

  Forty years ago Salim Nasr identified a “crisis of Lebanese capitalism” as a “backdrop” to the country’s civil war (1975–1990).1 Thirty years after the Taif Agreement helped end the fighting, Lebanese capitalism is now facing another severe crisis. The symptoms of the crisis are skyrocketing public debt and a looming currency crisis, overreliance on real estate and finance, persistently high poverty rates, and failures in public services, health, education, and social welfare. The causes of the crisis predate the arrival of Syrian refugees after 2011, who have nonetheless become convenient scapegoats and a means of extracting aid from the international community. Looking beyond these symptoms, this article offers an analysis of Lebanon’s political economy: What is the cause, the nature, and the effect of the current crisis?

  Most commentators place confessional power-sharing at the heart of their analysis of Lebanese politics. It is said not only to enable economic and political liberalism2 but also to weaken the state, disabling any effective security or economic policies.3 The World Bank finds that militia leaders and oligarchs have “captured” Lebanon’s confessional postwar state under the veil of sectarianism.4 Several authors emphasize the continuity of crises over time. Gaspard, for instance, demonstrates the persistence of laissez-faire economics creating recurring economic crises, while Dib narrates Lebanese history as a continuous interplay of “warlords and merchants.”5 Lebanon’s capitalism has always been prone to crises but the central symptom of the current crisis is the unprecedented level of government debt managed by the finance ministry and central bank. Persistent sectarianism and state weakness alone simply cannot explain the specific nature of the current malaise. In this article I show how transformations of Lebanon’s role in the global and regional political economy helped reshape its class structure and state. I then propose a very schematic initial analysis of different social classes. A first section sets out Nasr’s analysis of the prewar Lebanese crisis of capitalism. The section explains changes in Lebanon’s position in the international political economy, and how this affected the Lebanese state and class structure during the civil war. The second section shows how these wartime shifts led to the integration of Lebanon’s postwar economy into Gulf rentierism through finance and real estate. Rentierism here refers to Gulf economic dependency on oil income, which in turn radiates out to the wider Arab world through government aid or corporate investment to non-oil Arab states such as Lebanon.6

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  Lebanon

  Liberation, Conflict, and Crisis

  • B. Rubin(Author)
  • 2009(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  According to a doc- ument submitted by the Lebanese government to a conference of donors in Paris in January 2007 (known as Paris III), Lebanon barely had any debt. It enjoyed prudent economic management and an economy driven mainly by a dynamic private sector and supported by a small public sector. It enjoyed low inflation, high rates of economic growth, large balance of payments sur- pluses, small fiscal deficits, and a floating, stable, and fully convertible domestic currency pegged to the U.S. dollar. By May 2008 dollarization covered 77.5 percent of economic activities. 14 A combination of a stable macroeconomic environment, liberal eco- nomics, and its role as a regional intermediary gave Lebanon a strong com- parative advantage in the services sector of its economy, particularly in banking and finance, tourism, insurance, and trade-related services. 15 However, this blissful situation was quickly to turn upside down as a result of the civil war, which extracted a heavy toll in human and material terms. The economy suffered from the destruction of infrastructure and indus- trial facilities while the reluctance to invest resulted in the obsolescence of remaining production capacity. There was mass emigration, which repeated itself after the July 2006 war between Hizballah (Party of God) and Israel, with an unmitigated loss in professional and entrepreneurial skills. The emigration of workers was also accompanied by the flight of capital as investment opportunities became both limited and risky. The massive destruction of infrastructure was estimated by the United Nations to have cost Lebanon $25 billion, equivalent to about six to seven times the GDP in 1990.

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  The Lessons of Lebanon

  The Economics of War

  • Samir Makdisi(Author)
  • 2004(Publication Date)
  • I.B. Tauris

    (Publisher)

  A large proportion of the deposits switched into foreign currency denominations were held in the Lebanese banking sys-tem and not transferred abroad. Loss of confidence began in the wake of the Israeli invasion and accelerated as of 1984. As already pointed out, the rate of growth in Lebanese pound denominated deposits and in domestic credit fell behind the inflation rate, and concomitantly the rate of switching national currency deposits into foreign currency deposits accelerated with an increasing proportion transferred abroad. 83 The rapid depreciation of the pound beginning in 1984 was at once a cause and a consequence of waning confidence. On the other hand, the economic resilience of the private sector under prevailing conditions carried with it a substantial social cost. With govern-mental authority greatly weakened, the proliferation of business activities was unregulated. Sometimes this amounted to de facto expropriation by private groups and individuals of public and private property, which in turn caused further deterioration of existing facilities. Uncontrolled trade flourished, de-priving the government of revenue, while unchecked growth in suburban areas widened the belt of poverty around Beirut and other cities. The supremacy of private over public interests (already a strongly established tradition) was further strengthened, with increased adverse social consequences which or-dinary citizens had to bear. In addition to the economic resiliency of private enterprises, the role of various private civil groups and NGOs in attempting – sometimes successfully and sometimes not – to maintain a semblance of social order should not go 64 · The Lessons of Lebanon unremarked. Such groups sprang up in different parts of the country, which progressively came to be divided along sectarian lines imposed by the warring factions.

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