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deal-making is now put in question. The system that worked a century ago based on consensual political deals between a few political leaders is no longer viable. Failure to build real state institutions and to foster a political culture with genuine political parties, public policies, and representative elections has caught up with the country’s elites. The post-civil war efforts to rebuild wartorn Lebanon in the ’90s witnessed excessive borrowing and conversion of public debts into high interest-rate treasury bonds, while offering extraordinary interest rates on deposits in Lebanese Pounds. This encouraged people to deposit their money instead of investing it, hence inducing sluggish growth, and giving the banks a stronger sway in the economy. The decades of borrowing money were offset by foreign remittances from Lebanese expatriates, a newly-imposed value-added tax and income from tourism, foreign investment, real estate and the telecom industry as Lebanon was attempting to regain its spot as a haven of tourism, banking and services. But then the winds did not blow in the direction of the Lebanese ship. In 2006, Israel waged a war on Lebanon which wrought destruction in the billions of dollars; in 2008, following the global financial meltdown, most of the foreign income upon which Lebanon relied, shrunk significantly. In 2011, Syria, Lebanon’s main trading partner and supply route, descended into war, severely interrupting economic activity. All the while, lack of accountability, impunity and corruption were rampant; the economy produced nothing of significance; and the basic services such as electricity, water, roads and internet remained backward and barely available. The electricity sector alone cost the Lebanese treasury an excess of $43 billion in waste and mismanagement over the past three decades. That figure is equivalent to more than 40 percent of the country’s entire debt. Lousy and expensive public services, a rise in poverty and inequality, unprecedented rates of pollution and excessive corruption sent people to the streets on October 17, 2019. The most serious street demonstrations Lebanon had seen since prewar time, the 17 October movement, AUGUST/SEPTEMBER 2020
which united all Lebanese, brought down the government and ushered in a cabinet of quasi-independent professionals hoping to save the country and the economy. But it was too little too late. By then, the banking sector—built on a pyramid scheme of deposits in exchange for high interests— had collapsed. People’s deposits were trapped, and foreign currency reserves depleted, sending the Lebanese Pound into free fall. At the time of writing the local currency had lost close to 60 percent of its value; poverty and unemployment doubled, and a massive number of businesses and retail shops have shut down. The situation is so alarming that the American University of Beirut, a 150-yearold beacon of learning in the region, is facing an unprecedented financial crisis and is about to lay off thousands of employees—a first in its history of existence. Today, under pressure by unprecedented protests and reeling from an economic catastrophe with no end in sight, along with dealing with the COVID-19 pandemic, Lebanon is paying the price of decades of negligence, corruption and political failure. Caught in the middle of a regional confrontation between Iran and the United States, there seems to be no light at the end of the country’s long and arduous economic tunnel. The United States accuses the current government of being a Hezbollah puppet and supports an undeclared em-
bargo on any financial aid to the country, lest it be used as a lifeline to save the current government and prolong Hezbollah’s hold. Hezbollah, in return, refutes the allegations and accuses the U.S. of deliberately bankrupting the country by sabotaging an IMF bailout deal and pressuring its allies in the Gulf and Europe not to provide assistance, in the hope of bringing the Party of God to its knees. Lebanon’s entire political system is now under threat and, short of a miracle that extends its life, it is due for a major shake-up. Many Lebanese see a rare opportunity today to reinvent the political system on a cleaner slate of established political institutions and a genuine rule of law that would deliver a truly democratic political practice. In fact, any economic bailout for the country would extend the reign of a defunct political elite that many Lebanese want to do away with. They would like to see them replaced by a new brand of politicians capable of lifting the country out of its current morass. As it faces its most serious existential threat in its century-long history, Lebanon is ripe for fundamental changes to its identity, make-up and foundations. The question remains as to how and in what new form of governance the country will re-emerge from the current political nadir it has found itself in, especially since, at the moment, there are no credible political alternatives to the existing ruling class. ■
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WASHINGTON REPORT ON MIDDLE EAST AFFAIRS
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