A New Economic Model Needed to Reduce Inequality in Lebanon

A New Economic Model Needed to Reduce Inequality in Lebanon

The revolution has been linked to the acute problem of inequality in Lebanon. This uprising was against the power elites with an aim to end sectarianism politics. In this blog post, I refer to the power elites as ruling politicians, rent-seeking billionaires and the connected wasta seeking class. The October 2019 revolution was primarily a revolt against the authority.

The Revolution Has Once Again Proved That 

“The Power with the people is more than the power with the people in power.” - Wael Ghonim Click To Tweet

The Hariri government was forced to resign and if the present government fails to deliver relief than the same fate will befall them. The ordinary citizen’s demands are alleviating everyday sufferings, repair the damage to the environment, clean the sea and river pollutants, improve the air quality, mitigate the hazardous air polluting effects of the diesel generator, and provide relief from chronic power cuts.

How Do We Resolve the Crisis?

Lebanon today faces the triple crisis of currency devaluation, overwhelming debt and a banking crisis.  Information is the soft power which can cut the hard power of the of money, authority and state. Accountability, transparency and empowering every citizen to effect the change is paramount.

A Revolution Against Inequality in Lebanon

The post-independence and post-Taif sectarian economic order have benefited only a minority of the population. The demonstrations by the protestors at privatised spaces of Luxury like Martyrs Square, Zeitoneh Bay symbolise the revolt against inequality.

Lydia Assoud in her academic paper attributes the October 2019 protests to the extreme levels of inequality in Lebanon. In her paper, Lydia finds out that Billionaires wealth is 30% of the total national income.

The main results of the paper concluded that the richest 10% and 1% of adults accounted for 56% and 23% of the total national income. The top 0.1% of the adult population is approximately 3000 individuals and receive the same… Click To Tweet

Ala’a Shehabi in her glorious essay Inequality, Renteirism and the Roots of Lebanon’s October 2019 Uprising says the biggest challenge for us to resolve the twin problems of inequality and sectarianism from the economic foundations of rentierism. She points out to the dire need to envision a new economic order which encompasses public good.

Ala’a also reaffirms Lydia's hypothesis that the high level of inequality is one of the primary reasons for the October uprising. All over the world, there is a rebellion against the power elite and nowhere more self-evident than… Click To Tweet

Rising Inequality a Global Phenomenon

Oxfam caused uproar reporting that eight men have as much money as 50% of the world’s population. Thomas Piketty in his work proved that the total income going to capital has overshot in all developed countries since 1990. Piketty formulates that if the profit rate exceeds the growth rate inequality will increase and wealth will get concentrated at the top.

Lebanon’s Failed Post War Neoliberal Economic Policy

Lebanon has always followed laissez-faire economic policies resulting in the absence of a welfare state. Neoliberal policy shift like those in western countries marked the reconstruction period following the civil war. We are seeing the after-effects of the post-war neoliberal economic policy of Rafiq al Hariri.

In his book Citizen Hariri: Lebanon’s Neo-Liberal Reconstruction Hannes Baumann has put in a detailed analysis of Hariri’s economic policies which highlights the contrasts between Hariri’s liberal rhetoric and his illiberal economic management. Baumman says that the centrepiece of the reconstruction policy was the Solidere mega project to reconstruct central Beirut and the anchoring of the lira to the US dollar. These processes created rents. Ala’a Shehabi in her essay says that the very idea of “public goods” that are universally enjoyed by everyone such as clean water, national defence was slowly removed in the sectarian state.

A Vision for a New Economic Model for Lebanon

The world and not only Lebanon needs a new economic model. The dominant ideology from corporations is growth at any cost. A 2011 University of Zurich study reported that a small group of 147 companies controlled 40 per cent of the world’s wealth. The number one priority of these Global Power Elites is to bring in 3 per cent to 10 per cent of average return on investments. Where the investments occur is of less importance therefore investments in war, weapons, fossils fuels, farmland, pesticides, fast food, nuclear are all just investments requiring adequate returns. This forced growth model has lead to an increasing concentration of wealth. The Global Power Elite justify this economic model with trickle-down economics.

In Lebanon, as you know “If anything trickled down in this system it is that pathological obsession with accumulation” Hage

Redistribution of Wealth

The most important political question of our era is how does one reduce this inequality and find an economic growth model which doesn’t have the self-annihilating need for growth. This growth-based economic model as we very well know produces conflict and right-wing majoritarianism around the world. How do we achieve an egalitarian society with democratic, non-violent social movements? If inequality remains unchecked, it will lead to public uprising and power elites would push back in forms of repression which could result in violence.

Capitalist Reformist have thought about various ways to redistribute wealth. Something like Basic Income is said to be beneficial as it would put money into the pocket of the ordinary man and boost spending and as a consequence growth. Increasing taxes on the super-rich is another popular opinion, which has the economists divided on the issue.

The Protestors Cannot Solve the Complex Problem of Inequality

Martin Gurri in his book Revolt of the Public and the Crisis of Authority in the New Millennium says that

The public’s new-found power does not come with any worked-out program or plan, and as a result, it poses the threat of nihilism. Click To Tweet

We all know the October revolution was not a well worked-out plan. In old school revolutions, they disposed of dictators and the revolutionaries would put their own government in power. This revolution was the public demanding for capable technocrats to take over and get the country of the debt crisis and not put on more financial burden on the ordinary citizen.

Power is the capacity to make others do what you would have them do. – Eric Liu

I believe the role of the protestors is to do just that. The protestors have the power to make our politicians, technocrats, and our billionaires do the right thing.

What Happens If Our Power Elites Don’t Deliver?

This crisis is no random phenomenon, the venality of our financial and political elites caused it. The power elites would be increasingly despised and as the people become more articulate they will expose them. This will lead to a complete breakdown of the society and the outcome could be chaos and strife.

Who is in a better problem to solve the crisis than the people who created it? Can the people who got us into the mess get us out? Ironically, I believe we need our power elites to solve the problems they themselves have created. What about the Mikati File? Sanioora’s file?

If the power elites are proud of their Lebanese heritage, their moral obligation to not let their brothers fall and do all in their power to solve the complex problems the country faces.

Doughnut Economics – an Antithesis to the Growth at Any Cost Economics

A new economic model needed to reduce inequality in Lebanon

I end this blogpost with the ideal economic model designed by renegade Economist Kate Raworth. Raworth asks us to imagine a doughnut with a hole in the middle. And imagine humanity’s use of resources radiating out to the hole. In the middle is a place where people are short on the essentials of life. We want to get everybody out of that hole. But we simultaneously can’t overshoot the outer ring where we put so much pressure on this extraordinary living planet. We then begin to kick it out of balance. We cause climate breakdown. We pollute the oceans, create a hole in the ozone layer. We push ourselves beyond the capacity of our planet. So in essence, the aim of the doughnut is to meet the needs of all people within the means the planet.

Kate Rawoth advocates a regenerative economic cycle rather than a growth-driven model. I recommend you watch this video to understand more about Doughnut economics.

Our Most Important Goal is to Reduce Inequality

Our ‘Most Important Goal” as a country should be to reduce income inequality. Every Lebanese deserves the right to a good standard of living, affordable healthcare, world-class education and common public goods.

Reducing inequality will drive up growth by putting in more cash in the hands of ordinary people. Acknowledgement of this inequality problem by the policymakers would lay an intent to work out a plan.

I would love to what the readers think about this issue in the comments.

About the author

Financial advisor to UHNWI, private entities, family offices, and companies. Certified Anti-Corruption Manager from The American Anti-Corruption Institute

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