Opinion |

Lebanon Is Headed Toward Economic Collapse. Should Israel Worry?

Beirut’s dysfunctional politics make it unlikely it will tackle its problems, and as Hezbollah takes blame, it could look for a convenient distraction

David Rosenberg
David Rosenberg
People protest against Lebanon's economic and political troubles, Beirut, Lebanon, January 20, 2019.
People protest against Lebanon's economic and political troubles, Beirut, Lebanon, January 20, 2019.Credit: \ Aziz Taher/ REUTERS
David Rosenberg
David Rosenberg

When Israelis, or for that matter anybody else, thinks of Lebanon they think of Hezbollah and maybe the hundreds of thousands of Syrian refugees Lebanon is hosting. A better way to think of the country is to think of trash.

Garbage is piling up in illegal landfills, being burned in open fields, and dumped in the Mediterranean, fouling the country’s coastal water. That is because four years after a crisis that led to mounds of trash accumulating on the streets of Beirut and the “You stink” protests, the government did absolutely nothing to address the problem, leaving private contractors to fill the void with nary an ecological standard in their way.

Normally a problem as in-your-face as garbage would spur a government to action. Unlike tackling a housing crisis or a budget deficit, voters can see a garbage crisis. Ecological disaster by garbage is easy to understand, and a solution is visible even to the most uninformed voter. It’s pure pothole politics and a politician who addresses it can expect to be rewarded at election time.

But that’s not the way things work in Lebanon. The perennial garbage crisis demonstrates why the even more severe crisis of the economy teetering on the edge of a debt cliff isn’t likely to get attention either. As improbable as it may seem, that could bring Israel to a clash with Hezbollah that neither side particularly wants.

But first, the economy. Lebanon has been in an economic funk for years, with GDP growth running at a pitiful 1% to 2% annually since 2011. The war in Syria next door is the proximate cause. It has hurt the banking and tourism industries that are the mainstay of the economy. It has also flooded Lebanon with as many as 1.5 million refugees – one for every four Lebanese, the highest per capita ratio in the world.

Meanwhile, debt has been piling up to an estimated 140% of GDP, the third-highest level in the world, and that doesn’t count the debt of state-owned entities like the dysfunctional electric power monopoly. In January , Moody’s downgraded Lebanon’s rating to Caa1.

The rating agency politely describes Lebanon’s debt as “speculative” and ‘high risk,” but since the subject is trash, let it be known that in common parlance the rating means Lebanese debt has been deemed junk.

What has kept Lebanon afloat is deposits made by diaspora Lebanese into local banks. But even that source of funds is shrinking as expats growing increasingly uneasy about keeping their money in banks located in what looks increasingly like a failed state.

Vote for the trashman

Lebanon’s new government, which took office at the end of January, has pledged to give top priority to the economy and take steps to reduce the budget deficit by one percentage point a year over the next five years.

But don’t take any of this as anything more than posturing. A group of donor nations agreed last April to provide $11.5 billion in aid, mostly in the form of loans, to help Lebanon, but made it conditional on economic reforms. Lebanon took Step 1 in the process by promising better behavior.

Words come easy. Step 2, which is actually undertaking them, is something else.

The pledge for change came from Prime Minister Saad Hariri, but his power to govern is subordinate to Hezbollah, which controls parliament. And, even Hezbollah doesn’t call all the shots.

Unfortunately, the old chestnut about Lebanese politics being a game of divvying up power and privilege among its multiple religious sects remains true today. Hariri’s government is an unwieldy 30 ministers for a population of just four million people and it took no less than nine months to form as the politicians fought over who would get what.

In the end, the cabinet line-up is pretty much made up of the same power brokers who were in the last government. They didn’t address the trash and economy issue before and felt no urgency over nine months to form a government that could, despite the obvious urgency.

Meantime, Lebanon’s government has effectively ceded its powers to private actors. The military is in the hands of Hezbollah, which has more fire power than the army. But so are a lot of other state functions, for example garbage.

Since the state isn't removing the trash, the job has been taken over by private contractors usually affiliated with a political party, who get rid of the waste whichever way they can, including just dumping into the sea, burning it, or creating illegal landfills.

Mistrustful of the system, instead of voting for a party or politician who will get the government itself to remove trash, you vote for the party that is actually providing the service now.

The politicians, who are making money on the side out of providing state services privately, have little incentive to change things.

One way the deadlock created by patronage politics could be broken is a nice little round of fighting with Israel. As the acknowledged power behind the throne, Hezbollah is the likely candidate to take the rap for Lebanon’s descent into economic and environmental hell.

I doubt Hezbollah is so cynical and casually risk-averse to employ a “wag the dog” strategy by goading Israel into a destructive conflict, even if it thinks the ensuing destruction might unlock aid money. However, it’s easier to imagine that as the pressures mount, Hezbollah looks for a distraction on the border in expectation that Israel doesn’t really want war and will respond with restraint.

If that sounds eerily similar to the miscalculation that led to the Second Lebanon War, remember that history has a way of repeating itself.

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