Collapse

I'm not an expert on Lebanon nor particularly on the category of crisis that land is experiencing right now, but I do think I understand it well enough to draw some broad lessons. The consequences for the Lebanese are horrific. If you have a NYT read left this month this by Lina Mounzer is hard to read. An excerpt:

I begin my days in Beirut already exhausted.. . . .Every few days there’s a new low to get used to. One recent morning I needed to exchange some dollars to buy groceries, chiefly bread.. . .Once I had my money, I headed to the supermarket, and on my way I encountered a tiny old woman sitting on the pavement. I wanted to give her some money and a bottle of cold water. I went to four shops before I found one. This was how I first learned that we are now also facing a shortage of bottled water. The week before, I’d discovered that there was a shortage of cooking gas after our canister ran out and I had to make a dozen calls — and pay five times what it once cost — to replace it. While cooking gas is vital, the shortage of bottled water is an even bigger disaster in a country where most Lebanese believe the tap water isn’t even safe enough to cook with. . . .

Likewise, there is little bread to be found. There was none at the big supermarket I went to that day, which was entirely dark, lit only by weak emergency lights. The meat, cheese and freezer sections are all empty because there’s no fuel for refrigeration. I asked for bread at every shop I passed, and in the end realized I had to go to the bakery. I avoid that street as much as possible because the bakery is right next to the gas station, and gas stations are our new front lines. Scuffles break out because there are always too many people fighting for too little fuel. Quickly, I wound my way through the shouting, shoving crowd, which included a good number of armed soldiers trying to manage the situation, and made it to the bakery. I bought the last bag of bread.

 

How and why did this happen? Lebanon was once a prosperous, cosmopolitan nation, well educated, with a large professional class that exported consulting services to the world; a thriving tourist economy, a center of finance. The problems began with a sectarian civil war from 1975 to 1990.  Lebanon's government has a structural flaw, in that the constitution allocates representation by religion. The country is notable for religio-ethnic diversity, with Sunni, Shiite, Christian and Druze populations, complicated by the presence of large numbers of displaced Palestinians. The people generally coexist amicably, but the system makes good governance impossible. Corruption and mismanagement of national finances are the basic cause of the collapse, exacerbated by the withdrawal of support from the Arab oil monarchies as Iran became more influential in the country. The port explosion a year ago was perhaps the coupe de grace, but it resulted from the same corruption and misgovernance that caused the financial crisis.*

The broad lesson I want to draw here is that Lebanon did not suffer from any sort of natural disaster. This did not result from drought, or blight, or natural resource depletion. Nor was it dependent on industries that became obsolete, or trading relations that dried up. Or rather, the latter did happen but it was as a function of decline that had already begun; it was part of a death spiral. And no, this has nothing to do with socialism. Rather the opposite I would say -- a failure to properly regulate business, and to tax and restrain the oligarchy. Lebanon was and is a capitalist country.Modern economies are dependent on an infrastructure of economic management by government which is largely invisible to most citizens. When it operates to serve a small, corrupt elite, rather than the people, disaster can ensue.

 *This is not a generic lesson about government borrowing or national debt. The problem is that government borrowing was not invested, but rather operated as a Ponzi scheme. The U.S., for example, has plenty of underlying economic productivity to repay its debts, and borrowing to invest is a perfectly sound practice. Furthermore little government money in the U.S. is stolen, with the exception of the the bloated military-industrial complex, and recently, the massive theft of government funds by Donald J. Trump.