If you want a sense of the tragicomedy that is Lebanon today, you need not go further than Thursday’s headlines. Saad Hariri, who resigned as premier almost exactly a year ago in the face of street protests demanding a purge of the country’s corrupt elite, has now been tapped to form the next government.
Those were hopeful times in October 2019, but they didn’t last long. In the intervening year Lebanon’s economy has collapsed, the coronavirus has spread uncontrolled and an explosion at the Port of Beirut has left a good part of the city in ruins. People have grown desperate enough to fit out flimsy boats and cross the Mediterranean in hopes of fleeing to Cyprus.
Yet, as the pile of problems grew higher and higher, Lebanon leaders just sat back and waited.
It took three months to form a government after Hariri announced he was stepping down, but the new premier, the hapless Hassan Diab, made no headway at all in the nine months he was in power. Talks about a bailout plan with the International Monetary Fund collapsed without the sides even agreeing what the problems were that needed to be solved. Meanwhile, COVID raged, all but ignored by the authorities.
About the Diab government’s only proactive measure was to default on debt last March, which at least had the positive effect of reducing Lebanon’s repayment costs. The port explosion finally did the Diab government in, and since then Lebanon has been without a permanent government again.
The year of crises hasn’t produced any solutions, but it has turned the tables of revolution. The protesters who forced Hariri out of office have been worn down to the point that the one-year anniversary celebration of their victory drew just a few hundred faithful. Instead, the year has given Lebanon’s corrupt leaders breathing space to cement their hold on power and see off any reforms that threaten it. Hariri’s return completes the 360-degree turn.
What’s next? As hard as it is to believe, economically speaking the worst has yet to come.
- Don’t Be Fooled by Erdogan and Hezbollah: The Gas Wars Aren’t Over
- A Desperate Lebanon May Find a Savior in Beijing
- Kvetch How You Like, Israel's Economy Is Actually Holding Up Well
- Israel’s Haredim Have to Change and Coronavirus Could Be the Catalyst
The World Bank this week estimated that Lebanon's gross domestic product would not only contract 19.2% this year but continue shrinking in 2021 by another 13.2% – eye-popping declines even in a world where the coronavirus has wreaked economic havoc. Lebanon’s debt burden, already among the world’s highest relative to GDP, is set to continue growing, to close to 200% of GDP by the end of next year.
Poverty has soared and is going to soar higher. The United Nations estimates that in May, 55% of the population was living on less than $14 a day and close to half of them were in a state of extreme poverty. A lot of the poor once belonged to Lebanon’s rapidly shrinking middle class. Almost a third of the labor force is now believed to be unemployed while triple-digit inflation is making the cost of living prohibitive for those who still have jobs.
Inflation is also destined to grow worse, pushing even more people into poverty or into a desperate and often fatal attempt to leave the country. That is because the central bank is rapidly running down the foreign currency reserves it has been using to subsidize the cost of importing basic necessities by letting importers convert Lebanese pounds into dollars at the official rate of 1,507.5 rather than the black market rate of 8,000.
In power and unrepentant
Riad Salameh, the governor of Lebanon’s central bank, is part of the power elite that simply won’t surrender. He has led the Banque du Liban since 1993 and whatever his successes in the past in steering the country through crises like the 2009 financial crisis, he was certainly to blame for orchestrating the Ponzi-like scheme that collapsed a year ago and began Lebanon’s descent into dysfunction.
A year later, Salameh is still leading the central bank as if nothing happened. Now, it seems, he will soon be reporting to his old boss Hariri, himself a two-term premier and the son of a two-term premier. A Foreign Policy report says that whatever promises Hariri has made about appointing a cabinet of technocrats, the key finance and electricity portfolios will be going to be given to men in the Old Guard to ensure that the old corrupt way can go on undisturbed.
The past year has seen Lebanon side relentlessly, if not quite into the ranks of failed states, into the ranks of thoroughly dysfunctional states. As is the case in Venezuela and Zimbabwe, Lebanon’s new peer group, it’s one where a self-serving government holds the reins of power – indeed, about its only function is to hold the reins of power – while the rest of the country staggers on as best it can.
In Venezuela and Zimbabwe, a malevolent ruling class has clung to power despite economic collapse and international sanctions. With Hariri’s return to power, it’s fair to assume that Lebanon’s political class has concluded that they can pull it off, too.