The nature of the model and the corruption it engendered made its survival dependent on capital inflows, diaspora remittances, and loans from Western governments and international organizations. Through their easy relations, the two Hariris were the guarantors of this unsustainable rentier economic structure. However, systemic cracks resulting from harmful practices have remained pervasive, regardless of multiple temporary bailouts – namely Paris 1, 2, 3 and 4 (CEDRE).
Aid conferences and exceptional increases in foreign investment, especially between 2007 and 2010, delayed recurring threats of collapse. At the same time, this influx of capital swelled the banking sector (about 4 times the size of the national economy), allowing it to finance the huge public deficit of the State and to invest in unproductive but very profitable sectors, in particular real estate.
Due to investment failure, regional instability and loss of confidence in the economy, Lebanon’s balance of payments started showing a persistent annual deficit from 2011. This gradually depleted reserves. central bank exchange rates, which are necessary to secure the peg of the dollar lira and finance the import-dependent economy.
The central bank therefore resorted to unorthodox “financial engineering” measures by offering commercial banks extremely high interest on the dollars they deposited in its coffers. While this Ponzi scheme has led to strangely high interest rates for depositors and record profits for banks, it has paved the way for the current cash crunch that has essentially converted people’s savings into simple accounting entries.
Opposition to neoliberal policies
While the October 2019 Revolution was sparked by an increasingly precarious socio-economic reality, opposition to Harirism actually has an often forgotten history. In fact, the protest began in the 1990s with campaigns against privatized reconstruction projects that stole public funds and took over people’s land. The rise of Solidere, a Hariri-owned development company tasked with rebuilding downtown Beirut, reflects this growing trend to prioritize rent creation at the expense of citizens’ social and economic rights.
The unions also strongly opposed regressive neoliberal policies in the mid-1990s, until they were suppressed and co-opted by the political establishment. Likewise, the agricultural movement of 1997, known as the “Revolt of the Hungry,” was also directly linked to policies that marginalized local productive sectors while intensifying dependence on imports.
The years that followed saw such violations of social and economic justice continue, leading to ‘garbage protests’, which directly resulted from an inability to deal with a re-emerging waste crisis due to private economic interests preventing the overhaul of the sector.
While this reactionary movement did not lead to tangible changes, the October 2019 revolution forced Harirism to face a grim reality – asking it to face its past decisions and forcing it to face. its potential downfall. From this perspective, what future awaits the Lebanese political economy?
Alternative futures in conflict
While going with Diab may seem like a step away from the long-standing economic norm that Hariri embodied, today’s reality is actually more complicated. The Hezbollah-led camp, which brought Diab to power, may wield populist slogans and socialist rhetoric, but its track record and complicity in preserving Harirism suggests otherwise. Indeed, Hezbollah has made clear its support for Hariri’s return as prime minister, but his attachment to terms opposed to his interests forced the Iranian-backed party to resort to an alternative strategy.