Unprecedented Economic Crisis in Lebanon: Is There an Alternative?

Lebanon has a new government. It is formed of technocrats, most of whom are beholden to traditional Lebanese political parties. Three of these parties, the Future Movement, Lebanese Forces, and the Phalangist Party, opted out of participating in this cabinet. The Lebanese protesters who have been demanding an end to corruption and the rules of the game in place since the 1989 Taif Agreement have rejected the new government. Decades-long political rule by the same group of 5-6 men has institutionalized corrupt practices at all levels of the Lebanese government and society and led the country to the brink of an economic abyss. 

Lebanon is now facing an unprecedented economic crisis that threatens to push half of the population into poverty, forcing the government to default on its debt obligations, and imposing austerity measures on a population that has no social safety net to fall back on. The social safety net that is in place is highly fragmented and totally inadequate to ensure food security and provide basic services like health care and education. 

The international community has so far adopted a “wait and see” approach, awaiting the actions of the new government. An economic assistance package totaling $11 billion promised in April 2018 is conditional on the political and fiscal reforms the new cabinet will implement. Any reform package will require consensus among the political elites and, more importantly, support from Lebanese citizens — support which will not be forthcoming given that this government lacks legitimacy as far as large swaths of the population are concerned. 

The ongoing protest movement will ebb and flow, but it will not be quashed. The challenge is whether it can transform itself into a sustained political movement that can offer a governing alternative to the current political class. While the great majority of Lebanese sympathize with its demands of better governance and an end to corruption, the leadership of the protest movement is decentralized, made up of several nodes that embrace sometimes contradictory positions on the same issues, and has yet to develop a coherent set of policies, especially when it comes to the economy.

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There are different opinions on the staying power of this government. One could argue that given the almost impossible task of finding short-term solutions to the economic crisis this government is called upon to deal with, public pressure for it to resign will soon mount and the political class will find it expedient to have a scapegoat for problems that have been in the making for the past 40 years. The experience of other countries that have faced similar economic crises suggests that such governments do not last long. Economists are already talking of a lost decade in Lebanon, arguing it will take at least 10 years for the country to find its way out of the current economic impasse. 

As the tempo setter of Lebanese politics, Hezbollah is facing an unprecedented governing challenge. Known for its military prowess, Hezbollah lacks the economic expertise to come to grips with the multi-faceted technical aspects of the economic crisis. Along with other members of the Lebanese political class, Hezbollah’s leaders have been until recently in denial about the severity of the situation. The party is now focused on financing a social safety net for its main constituents, the Lebanese Shia, to help them deal with the severe economic conditions.

Lebanon’s economic crisis is wreaking havoc on the Syrian economy as well. Syria has relied on its ties to the Lebanese banking sector to keep business and commerce going during its civil war. With Lebanese banks imposing strict capital controls on dollar deposits, Syrian businessmen and citizens are denied access to their funds, bringing the flow of dollars to Syria almost to a stop. Over the past twelve months, the Syrian pound has halved in value, triggering price inflation with severe consequences for the purchasing power of the more than the 80% of the Syrian population living below the poverty line. Protests in regime-held areas, something that has not been seen for a while, are now taking place in response to the sharp increase in the cost of living. 

Lebanon is likely to be mired in a protracted political and economic crisis for the foreseeable future. The country will be stuck between a government that lacks legitimacy and is unable to offer better living conditions for its citizens and a protest movement that channels the frustration and anger people feel toward the ruling class while being unable to offer a governing alternative on which they could bet.

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