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

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.

Notes

Notes

1 Salim Nasr, “Backdrop to Civil War: The Crisis of Lebanese Capitalism,” MERIP Reports 73 (1978): 3–13.

2 Nadim Shehadi, The Idea of Lebanon: Economy and the State in the Cénacle Libanais 1946–54 (Oxford: Centre for Lebanese Studies, 1987); Michael Young, “The Lebanon Exception,” Diwan, 19 July 2017, http://carnegie-mec.org/diwan/71565?lang=en.

3 Samir Makdisi and Marcus Marktanner, “Trapped by Consociationalism: The Case of Lebanon,” Topics in Middle Eastern and North African Economies 11 (2009): 1–15; Boaz Atzili, “State Weakness and ‘Vacuum of Power’ in Lebanon,” Studies in Conflict and Terrorism 33, no. 8 (2010): 757–82.

4 World Bank, Lebanon Economic Monitor: The Great Capture (Washington, DC: World Bank, 2015); Eric Le Borgne and Thomas Jacobs, Lebanon: Promoting Poverty Reduction and Shared Prosperity (Washington, DC: World Bank, 2016), 11–12.

5 Kamal Dib, Warlords and Merchants: The Lebanese Business and Political Establishment (Reading: Ithaca Press, 2004); Toufic Gaspard, A Political Economy of Lebanon 1948–2002: The Limits of Laissez-Faire (Leiden: Brill, 2004).

6 The classic statement on rentierism is Beblawi’s article on the “rentier state,” while the recent Marxist critiques contextualize the rentier state—and the effect of rentierism—through a more complex story of capitalist development. Hazem Beblawi, “The Rentier State in the Arab World,” in The Arab State, edited by Giacomo Luciani (London: Routledge, 1990), 49–62; Adam Hanieh, Capitalism and Class in the Gulf Arab States (London: Palgrave Macmillan, 2011).

7 Michael Johnson, Class and Client in Beirut: The Sunni Muslim Community and the Lebanese State 1840–1985 (London: Ithaca Press, 1986), 25–26.

8 Gaspard, A Political Economy of Lebanon 1948–2002; Nasr, “Backdrop to Civil War.”

9 Carolyn Gates, The Merchant Republic of Lebanon: Rise of an Open Economy (London: IB Tauris, 1998).

10 Johnson, Class and Client in Beirut.

11 The rest of this paragraph summarizes Nasr’s argument (Nasr, “Backdrop to Civil War”).

12 Nasr, “Backdrop to Civil War,” 10.

13 Farid El-Khazen, The Breakdown of the State in Lebanon (Cambridge, MA: Harvard University Press, 2000), 262.

14 El-Khazen, The Breakdown of the State in Lebanon.

15 Lea Bou Khater, Labour Relations in Lebanon: Trials and Tribulations of the Labour Movement (PhD dissertation, SOAS, University of London, 2017): 170–74; Fawwaz Traboulsi, A History of Modern Lebanon (London: Pluto, 2007).

16 Johnson, Class and Client in Beirut.

17 Hicham Safieddine, “Al-Lubbi al-Masrafiyyi fi Lubnan: al-Juzur al-Mu’assasatiyya li-Sultat al-Mal,” al-Adab, 15 Oct. 2015; Jamil Mouawad and Hannes Baumann, “Wayn al-Dawla? Locating the Lebanese State in Social Theory,” Arab Studies Journal 25, no. 1 (2017): 66–91.

18 Salim Nasr, “The Political Economy of the Lebanese Conflict,” in Politics and the Economy in Lebanon, edited by Nadim Shehadi and Bridget Harney (Oxford: Centre for Lebanese Studies, 1989), 43–50.

19 Hannes Baumann, “The ‘New Contractor Bourgeoisie in Lebanese Politics: Hariri, Mikati and Fares,” in Lebanon: After the Cedar Revolution, edited by Are Knudsen and Michael Kerr (London: Hurst, 2012), 125–44.

20 Elizabeth Picard, “The Political Economy of Civil War in Lebanon,” in War, Institutions, and Social Change in the Middle East, edited by Steven Heydemann (Berkeley: University of California Press, 2000); Traboulsi, A History of Modern Lebanon.

21 Reinoud Leenders, Spoils of Truce: Corruption and State-building in Postwar Lebanon (Ithaca, NY: Cornell University Press, 2012), 101–2.

22 Baumann, “The ‘New Contractor Bourgeoisie in Lebanese Politics,’” 125–44; Eric Verdeil, “Reconstructions manquées à Beyrouth,” Les Annales de la recherche urbaine, 91 (2001): 65–73.

23 Nasr, “The Political Economy of the Lebanese Conflict,” 43–50.

24 Gaspard, A Political Economy of Lebanon 1948–2002, 202–7.

25 Theodor Hanf, Coexistence in Wartime Lebanon: Decline of a State and Death of a Nation (London: IB Tauris, 1993); Michael Kerr, Imposing Power-sharing: Conflict and Coexistence in Northern Ireland and Lebanon (Dublin: Irish Academic Press, 2005).

26 Najib Hourani, “Transnational Pathways and Politico-economic Power: Globalisation and the Lebanese Civil War,” Geopolitics 15, no. 2 (2010): 300.

27 George Corm, “The War System: Militia Hegemony and Reestablishment of the State,” in Peace for Lebanon? From War to Reconstruction, edited by Deirdre Colling (Boulder, CO: Lynne Rienner, 1994), 215–30; Picard, “The Political Economy of Civil War in Lebanon.”

28 Unless indicated otherwise, data in this section are downloaded from the World Development Indicators database.

29 According to the IMF World Economic Outlook database, April 2018.

30 Ibid.

31 Le Borgne and Jacobs, Lebanon, 49.

32 Makdisi and Marktanner, “Trapped by Consociationalism.”

33 Mouawad and Baumann, “Wayn al-Dawla?” 66–91; Julia Sakr-Tierney, “Real Estate, Banking and War: The Construction and Reconstructions of Beirut,” Cities 69 (2017): 73–78.

34 Baumann, Citizen Hariri: Lebanon’s Neoliberal Reconstruction (London: Hurst, 2016).

35 Leenders, Spoils of Truce, 108–13.

36 In 1994, Rafik Hariri subscribed to 7 percent of Solidere shares. The upper limit that an individual shareholder could acquire was 10 percent. Al Nahar, 8 Jan. 1994, 1, 15.

37 Marieke Krijnen and Mona Fawaz, “Exception as the Rule: High-end Developments in Neoliberal Beirut,” Built Environment 36, no. 2 (2010): 245–59.

38 Gaspard, A Political Economy of Lebanon 1948–2002.

39 Ibid., 218.

40 Axel Schimmelpfennig and Edward Gardner, “Lebanon—Weathering the Perfect Storms” (WP/08/17 IMF Working Paper, International Monetary Fund, Washington, DC, 2008).

41 Iain Hardie, “How Much Can Governments Borrow? Financialization and Emerging Markets Government Borrowing Capacity,” Review of International Political Economy 18, no. 2 (2011): 141–67.

42 Schimmelpfennig and Gardner, “Lebanon,” 6.

43 Bassam Fattouh, “A Political Analysis of Budget Deficits in Lebanon,” SOAS Economic Digest, no. 2 (1997).

44 Jad Chaaban, “I’ve Got the Power: Mapping Connections between Lebanon’s Banking Sector and the Ruling Class” (ERF Working Paper No. 1059, Economic Research Forum, Cairo, 2016), 1.

45 Dib, Warlords and Merchants.

46 UNHCR, Vulnerability Assessment of Syrian Refugees in Lebanon 2017 (UNHCR: Beirut, 2017), 11.

47 Raed Charafeddine, The Impact of the Syrian Displacement Crisis on the Lebanese Economy (Beirut: Banque du Liban, 2016), 4–8.

48 Anne Marie Baylouny and Stephen J. Klingseis, “Water Thieves or Political Catalysts? Syrian Refugees in Jordan and Lebanon,” Middle East Policy 25, no. 1 (2018): 104–23.

49 Lewis Turner, “Explaining the (Non-)encampment of Syrian Refugees: Security, Class and the Labour Market in Lebanon and Jordan,” Mediterranean Politics 20, no. 3 (2015): 386–404.

50 Guilain Denoeux and Robert Springborg, “Hariri’s Lebanon: Singapore of the Middle East or Sanaa of the Levant?” Middle East Policy 6, no. 2 (1998): 158–73.

51 Pierre Bourdieu, Acts of Resistance: Against the Tyranny of the Market (New York: New Press, 1998), 2.

52 For figures on public perceptions for the need of “connections” to obtain a public-sector job, see Le Borgne and Jacobs, Lebanon, 77; Baumann, Citizen Hariri.

53 Nisreen Salti and Jad Chaaban, “The Role of Sectarianism in the Allocation of Public Expenditure in Postwar Lebanon,” International Journal of Middle East Studies 42, no. 4 (2010): 637–55.

54 Lydia Assouad, “Rethinking the Lebanese Economic Miracle: The Extreme Concentration of Income and Wealth in Lebanon 2005–2014” (WID.world Working Paper No. 13, Paris, 2017); Edwin Saliba, Walid Sayegh, and Talal Sal, Assessing Labor Income Inequality in Lebanon’s Private Sector (Beirut: UNDP, 2017); Najwa Yaacoub, Maysaa Daher, Dean Jolliffe, and Aziz Atamanov, “Snapshot of Poverty and Labour Market Outcomes in Lebanon Based on Household Budget Survey 2011/2012” (World Bank Working Paper No. 102819, Washington, DC, 2015); Heba Laithy, Khalid Abu-Ismail, and Kamal Hamdan, Poverty, Growth, and Income Distribution in Lebanon (Brasilia: International Poverty Centre, 2008); Ministry of Social Affairs, Development of Mapping of Living Conditions in Lebanon 1995–2004 (Beirut: MOSA, 2007); UNDP, Mapping of Living Conditions in Lebanon (Beirut: UNDP, 1998).

55 Assouad, “Rethinking the Lebanese Economic Miracle,” 1.

56 Ministry of Social Affairs, Development of Mapping of Living Conditions in Lebanon 1995–2004, 19; Laithy, Abu-Ismail, and Hamdan, Poverty, Growth, and Income Distribution in Lebanon, 6; Yaacoub, Daher, Jolliffe, and Atamanov, “Snapshot of Poverty and Labour Market Outcomes,” 2.

57 Saliba, Sayegh, and Sal, Assessing Labor Income Inequality, 8.

58 Fawwaz Traboulsi, Social Classes and Political Power in Lebanon (Beirut: Heinrich Böll Stiftung, 2014), 9.

59 Chaaban, “I’ve Got the Power,” 2.

60 International Monetary Fund, “Lebanon: Financial System Stability Assessment” (IMF Country Report, No. 17/21, Washington, DC, 2017), 17.

61 Schimmelpfennig and Gardner, “Lebanon,” 22.

62 Fattouh, “A Political Analysis of Budget Deficits in Lebanon.”

63 Assouad, “Rethinking the Lebanese Economic Miracle,” 9.

64 According to the 2018 ranking of “the world’s billionaires” by Forbes, https://www.forbes.com/billionaires/list/ (accessed 27 Aug. 2018).

65 Baumann, “The ‘New Contractor Bourgeoisie in Lebanese Politics.’”

66 World Bank, “Doing Business,” http://www.doingbusiness.org/ (accessed 28 Aug. 2018).

67 Le Borgne and Jacobs, Lebanon, 43.

68 Poverty is measured with reference to income or expenditure, while deprivation refers to living standards. Ministry of Social Affairs, Development of Mapping of Living Conditions in Lebanon 1995–2004; Yaacoub, Daher, Jolliffe, and Atamanov, “Snapshot of Poverty and Labour Market Outcomes”; Laithy, Abu-Ismail, and Hamdan, Poverty, Growth, and Income Distribution in Lebanon.

69 Ministry of Social Affairs, Development of Mapping of Living Conditions in Lebanon 1995–2004; Yaacoub, Daher, Jolliffe, and Atamanov, “Snapshot of Poverty and Labour Market Outcomes”; Laithy, Abu-Ismail, and Hamdan, Poverty, Growth, and Income Distribution in Lebanon.

70 Laithy, Abu-Ismail, and Hamdan, Poverty, Growth, and Income Distribution in Lebanon, 12–13.

71 Ibid., 13.

72 Najwa Yaacoub and Lara Badre, “The Labour Market in Lebanon,” Central Administration of Statistics, Statistics in Focus, no. 1 (2011): 5.

73 Le Borgne and Jacobs, Lebanon, 75.

74 Laithy, Abu-Ismail, and Hamdan, Poverty, Growth, and Income Distribution in Lebanon, 14; Yaacoub, Daher, Jolliffe, and Atamanov, “Snapshot of Poverty and Labour Market Outcomes,” 4.

75 Laithy, Abu-Ismail, and Hamdan, Poverty, Growth, and Income Distribution in Lebanon, 9; Ministry of Social Affairs, Development of Mapping of Living Conditions in Lebanon 1995–2004, 30.

76 Laithy, Abu-Ismail, and Hamdan, Poverty, Growth, and Income Distribution in Lebanon, 9.

77 Ibid., 14; Central Administration for Statistis (CAS) and World Bank, Snapshot of Poverty and Labour Market Outcomes in Lebanon Based on Household Budget Survey 2011/2012, 4; Ministry of Social Affairs, Development of Mapping of Living Conditions in Lebanon 1995–2004, 68.

78 Central Administration of Statistics, “Education in Lebanon” (Statistics in Focus, No. 3, Beirut, 2012), 4.

79 Central Administration of Statistics, “Education in Lebanon,” 3.

80 Walid Ammar, Health System and Reform in Lebanon (Beirut: WHO and Ministry of Public Health, 2003), 11, 15.

81 Ministry of Social Affairs, Development of Mapping of Living Conditions in Lebanon 1995–2004, 72.

82 UNDP, Living Condition of Households 2007 (UNDP: Beirut, 2008), 156.

83 Leenders, Spoils of Truce, 74.

84 Melani Cammett, Compassionate Communalism: Welfare and Sectarianism in Lebanon (Ithaca, NY: Cornell University Press, 2014).

85 World Bank, Lebanon Social Impact Analysis: Electricity and Water Sectors (Washington, DC: World Bank, 2009), 31.

86 World Bank, Lebanon Social Impact Analysis, 35.

87 Ibid., 39.

88 Eric Verdeil, “Infrastructure Crisis in Beirut and the Struggle to (Not) Reform the Lebanese State,” Arab Studies Journal 16, no. 1 (2018): 93.

89 Karim Eid-Sabbagh, A Political Economy of Water in Lebanon: Water Resource Management, Infrastructure Production, and the International Development Complex (PhD thesis, SOAS, University of London, 2015), 3.

90 World Bank, Lebanon Social Impact Analysis, ii.

91 Ziad Abu Rish, “Garbage Politics,” Middle East Report 45, no. 277 (2015).

92 Ibid.

93 Ibid.

94 Leenders, Spoils of Truce.

95 Cammett, Compassionate Communalism.

96 Joanne Randa Nucho, Everyday Sectarianism in Urban Lebanon: Infrastructures, Public Services, and Power (Princeton, NJ: Princeton University Press, 2016).

97 Bassel F. Salloukh, Rabie Barakat, Jinan S. Al-Habbal, Lara W. Khattab, and Shoghig Mikaelian, The Politics of Sectarianism in Postwar Lebanon (London: Pluto, 2015).

98 The “revolt of the hungry” of agriculturalists in the Bekaa valley in 1997–1998 was an exception that proved the rule, because it was also driven by internal Hezbollah power struggles. Augustus Richard Norton, Hezbollah: A Short History (Princeton, NJ: Princeton University Press, 2007), 106. Construction workers are mainly Syrian migrants who remain unorganized. John Chalcraft, “Of Specters and Disciplined Commodities: Syrian Migrant Workers in Lebanon,” Middle East Report 35, no. 236 (2005).

99 Hannes Baumann, “Social Protest and the Political Economy of Sectarianism in Lebanon,” Global Discourse 6, no. 4 (2016): 634–49.

100 Bou Khater, Labour Relations in Lebanon, 257.

101 Sara Fregonese, “Beyond the ‘Weak State’: Hybrid Sovereignties in Beirut,” Environment and Planning 30 (2012): 655–74; Waleed Hazbun, “Assembling Security in a ‘Weak State’: The Contentious Politics of Plural Governance in Lebanon Since 2005,” Third World Quarterly 37, no. 6 (2016): 1,053–70; Najib Hourani, “Lebanon: Hybrid Sovereignties and U.S. Foreign Policy,” Middle East Policy 20, no. 1 (2013): 39–55; Nikolas Kosmatopolous, “Toward an Anthropology of ‘State Failure’: Lebanon’s Leviathan and Peace Expertise,” Social Analysis 55, no. 3 (2011): 115–42; Sami Hermez, “When the State Is (N)ever Present: On Cynicism and Political Mobilisation in Lebanon,” Journal of the Royal Anthropological Institute 21 (2005): 507–23; Michelle Obeid, “Searching for the ‘Ideal Face of the State’ in a Lebanese Border Town,” Journal of the Royal Anthropological Institute 16, no. 2 (2010): 330–46; Nora Stel, “Languages of Stateness in South Lebanon’s Palestinian Gatherings: The PLO’s Popular Committees as Twilight Institutions,” Development and Change 47, no. 3 (2016): 446–71; Mouawad and Baumann, “Wayn al-Dawla?”; Ziad Abu Rish, “Conflict and Institution Building in Lebanon, 1946–1955” (PhD dissertation, University of California, Berkeley, 2014); Jamil Mouawad, “The Negotiated State: State-society Relations in Lebanon” (PhD dissertation, SOAS, University of London, 2015).

102 Abu Rish, “Garbage Politics.”

103 Sami Hermez, “On Dignity and Clientelism: Lebanon in the Context of the 2011 Arab Revolutions,” Studies in Ethnicity and Nationalism, 11, no. 3 (2011): 529–30.

104 Abu Rish, “Garbage Politics.”

105 Ziad Abu Rish, “Municipal Politics in Lebanon,” Middle East Report 46, no. 280 (2016).

106 Mouawad and Baumann, “Wayn al-Dawla?”; Sakr-Tierney, “Real Estate, Banking and War”; Leenders, Spoils of Truce.

107 Toufic Gaspard, “Financial Crisis in Lebanon” (Maison du Futur Policy Paper No. 12, Konrad Adenauer Foundation, Beirut, 2017); Rosalie Berthier, “Abracada . . . Broke: Lebanon’s Banking on Magic,” http://www.synaps.network/abracada-broke (accessed 14 Nov. 2018); “Lebanon’s Economy Has Long Been Sluggish: Now a Crisis Looms,” The Economist, 30 Aug. 2018, https://www.economist.com/middle-east-and-africa/2018/08/30/lebanons-economy-has-long-been-sluggish-now-a-crisis-looms.

108 For a further assessment, see Hannes Baumann, “Lebanon’s Economic Dependence on Saudi Arabia Is Dangerous,” Washington Post, 7 Dec. 2017, https://www.washingtonpost.com/news/monkey-cage/wp/2017/12/07/hariri-is-back-as-lebanons-prime-minister-heres-how-saudi-economic-influence-still-shapes-lebanese-politics/?utm_term=.5155bf9a8752 (accessed 13 Oct. 2018).

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Hannes Baumann

Hannes Baumann is a lecturer at the University of Liverpool. He is the author of Citizen Hariri: Lebanon’s Neoliberal Reconstruction. This work was supported by the Leverhulme Trust Study Abroad Studentship.