How neoliberalism defeated itself in Lebanon

How neoliberalism defeated itself in Lebanon
7 min read
27 Sep, 2016
Comment: Stagnant living standards, evaporating purchasing power and the intensification of the economy's rentier structures - Lebanon's failed economic policies are having a disastrous effect, writes Dr. Bassel F. Salloukh.
Post-war neoliberal policies in Lebanon have defeated the very foundations of neoliberal ideology [Getty]

This summer in Beirut has been especially trying. The country's usually bustling markets are empty. In Beirut's downtown souks, the most striking sight is of shops closing down, reopening under a new brand, only to close again after some time.

Some might argue that this is the not so surprising fate of a reconstructed souk that has the feel of a soulless duty free shopping area than the bustling hodgepodge and noise of a Levantine market. Conditions in less expensive and more popular markets are not any better, however.

In the real estate sector developers are whining about the empty apartments for sale, but prices are steady, nothing of the sharp price drops one would expect from a glut in the housing market. Adam Smith's invisible hand that purportedly regulates supply and demand has yet to visit Lebanon's real estate market.

The only booming industries in this city seem to be cafes, restaurants, hair salons, and nail spas, and their endless armies of car valets who exist on another planet and operate by their very own laws and ways. Perhaps the stress of living near the epicentre of the region's geopolitical battleground and the general political malaise in the country make these pastimes all the more urgent and rewarding.

But the emptiness of Beirut's markets, shops, its posh down-town gated neighbourhoods and apartment buildings, should not surprise us. The architects of Lebanon's postwar neoliberal service-oriented economy assumed that all they needed every year were three or four good summer months, when Arab tourists flock to the country's hotels, mountains, hospitals, and markets as they escape the searing summer heat in their countries, and when Lebanese immigrants return home for the compulsory annual family visit.

Remittance inflows from Lebanese living abroad - 65 percent of which came from oil-producing countries - would take care of any deficit in the country's balance of payments (BoP). The numbers are indeed staggering: Remittances climbed from US$6.73 billion in 2012, to US$7.86 billion in 2013, to a high of US$8.9 in 2014 as a consequence of the war in Syria, then down to US$7.2 in 2015.

Some salaried-families have not been paid in the past 12 months

Yet when your economic model assumes a continuous stream of tourists and external revenue flows, it is not surprising then that a combination of geopolitical regional wars and declining oil prices produce an economic nosedive, one that is expected to continue as global and regional growth rates stagnate and debts in the global South start piling up as the world enters the "third phase of the financial crisis".  

The combined consequences of geopolitical wars and declining oil prices are devastating whole social segments in Lebanon. Some salaried-families have not been paid in the past 12 months, while others face the prospect of defaulting on their house mortgages as external revenue sources dry up.

The stress on weak public institutions and finances as a result of Syrian refugee flows into Lebanon pushes more and more people into unemployment and poverty. The number of people withdrawing their end-of-service pensions is growing: 17,064 in the first eight months of 2016 compared to 21,099 in all of 2015, 20,692 in 2014, 20,417 in 2013, and 17,628 in 2012.

Moreover, most of these cases - 60-68 percent in 2013 and 62 percent in 2014 - involve incidents of early pension requests driven either by sudden job termination or the dire need for cash to make ends meet. All this compounds Lebanon's unemployment crisis, already at a rate of around 34 percent.

But there is more than just external causes behind the current economic crisis in Lebanon. It is also a consequence of postwar neoliberal policies, the very policies that less than a decade ago wreaked havoc in the global economy: Postwar wages in Lebanon were intentionally repressed despite steady price increases, tax structures reward the have nots, and the state's fiscal policies are designed to benefit economic cartels, holdings, and off-shore companies. These policies are not geared towards stimulating the economy, raising wages, or investing in public schools, hospitals, a neglected agricultural sector, or dilapidated infrastructure.

It is the natural consequence of hyper inequalities produced by failed fiscal and monetary policies

When prices cater for the ten percent or less of society, then we shouldn't be surprised at the rate at which shops open then close in Beirut. When property prices cater for the ten percent or less, then there is nothing magical about the rows of empty buildings lining the Beirut skyline. This emptiness is not made in the skies.

It is rather the natural consequence of hyper inequalities produced by failed fiscal and monetary policies and their philosophical assumptions driving more than a decade and a half of postwar economic thinking - or the lack of it for that matter. Nor are there any signs that the failure of the postwar neoliberal model will lead to a new kind of economic model in Lebanon. Instead, neoliberal economic trends are intensifying.

You see this most blatantly in stagnant living standards and evaporating purchasing powers, the intensification of the economy's rentier structures, but also in the gradual south Asianisation of the labour force engaged in menial work, at a time when the rate of Lebanese living below the poverty line is increasing steadily.

Yet while hyper inequality and stagnant wages associated with decades of neoliberalism led to a veritable revolt against the ruling elite in the global West, one marked by the populist "return of class as a central agency in politics" especially in the US and the UK, Lebanon's sectarian entrepreneurs continue to operate unperturbed.

The everyday sufferings of the general population, the catastrophic environmental consequences expected from the country's shameful garbage crisis, chronic power cuts and the hazardous effects of diesel generators on the air Lebanese breathe, in addition to the cancerous impact of polluted river waters on agricultural products, has prompted the elite to do absolutely nothing.

The sectarian elite sustain the failed economic model while putting the whole country on life support

They continue to use sectarian mobilisation to camouflage intra-sectarian socioeconomic disparities, in the process hardening sectarian sentiments to obviate the emergence of inter-sectarian class solidarity. There is nothing primordial or culturally Lebanese about these dynamics.

Whether in Northern Ireland, Nigeria, or Iraq, the political science literature is laden with examples of ethnic or sectarian entrepreneurs deploying ethnic and sectarian mobilisation to protect their neopatrimonial political and economic privileges. Those Lebanese who are brave enough to swim against the sectarian current ultimately find themselves staring at a different shore, or isolated.

Instead of thinking of alternatives to the time-honoured but failed economic model upon which Lebanon is built, the sectarian elite sustain it while putting the whole country on life support.

This time, however, the Lebanese neoliberal model outsmarted itself. These days most Lebanese prefer to travel and shop abroad rather than go out and pay the insanely high prices charged for goods, services and leisure activities in the country. Why pay a dinner bill that amounts to the equivalent of an airline ticket to a nearby holiday destination?

As prices increase and salaries stagnate, slowly but surely the three or four months on which the Lebanese economy was supposed to live on will turn into three to four barren months. The Lebanese miracle is alive and kicking indeed, for even neoliberalism managed to defeat itself in this country.

Dr. Bassel F. Salloukh is Associate Professor of Political Science at the Lebanese American University (LAU) in Beirut. His recent publications include the co-authored The Politics of Sectarianism in Postwar Lebanon (Pluto Press, 2015), "The Arab Uprisings and the Geopolitics of the Middle East" in The International Spectator (June 2012), the co-authored Beyond the Arab Spring: Authoritarianism and Democratization in the Arab World (Lynne Rienner Publishers, 2012).

His current research looks at post-conflict power-sharing arrangements, the challenge of re-assembling the political orders and societies of post-uprisings Arab states, and the geopolitics of the Middle East after the popular uprisings. Follow him on Twitter: @bassel67

Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.