The nature of the model and the corruption it bred made its survival hinge on capital inflows, remittances from the diaspora, and loans from western governments and international organizations. Through their affluent connections, the two Hariris were the guarantors of this unsustainable rentier economic structure. However, systemic cracks resulting from nefarious practices remained pervasive, regardless of multiple temporary bailouts namely Paris 1, 2, 3, and 4 (CEDRE).

Aid conferences and exceptional hikes in foreign investment, particularly between 2007 and 2010, delayed recurrent threats of collapse. In parallel, this capital inflow was inflating the banking sector (worth around 4 times the size of the national economy), allowing it to finance the governments massive fiscal deficit and invest in unproductive yet highly profitable sectors, particularly real estate.

As a result of failed investments, regional instability, and loss of trust in the economy, Lebanons balance of payments started exhibiting a persistent annual deficit as of 2011. This progressively depleted the Central Banks foreign reserves, which are needed to guarantee the Liras peg to the dollar and finance the import-dependent economy.

The Central Bank hence resorted to unorthodox financial engineering measures by offering commercial banks egregiously high interests on the dollars they deposited in its coffers. While this Ponzi-like scheme led to oddly high interest rates for depositors and record-high profits for banks, it paved the way for the current crisis in liquidities that essentially converted peoples savings into mere accounting entries.

While the 2019 October Revolution was triggered by an increasingly precarious socio-economic reality, opposition to Harirism actually has an often forgotten history. In fact, contestation began in the 1990s with campaigns against privatized reconstruction projects that stole public funds and appropriated peoples lands. The rise of Solidere, a Hariri-owned development company tasked with rebuilding downtown Beirut, captures that growing trend of prioritizing rent-creation at the expense of citizens social and economic rights.

Trade unions also strongly opposed regressive neoliberal policies during the mid-90s, until they got repressed and co-opted by the political establishment. Similarly, the agriculturalist movement in 1997, known as the Revolt of the Hungry, was also directly tied to policies that marginalized local productive sectors while deepening reliance on imports.

Ensuing years saw such infringements on social and economic justice continue, leading up to the 2015 garbage protests, which directly resulted from an inability to manage a reemerging waste crisis due to private economic interests inhibiting the overhaul of the sector.

While this reactionary movement did not lead to tangible changes, the 2019 October Revolution forced Harirism to face a grim reality one asking it to deal with its past decisions and compelling it to confront its potential downfall. With that in mind, what type of future awaits Lebanons political economy?

While going with Diab may seem like a move away from the longstanding economic norm embodied by Hariri, reality today is in fact more complicated. The Hezbollah-led camp, which brought Diab to power, may brandish populist slogans and a socialist rhetoric, but its track record and complicity in preserving Harirism suggests otherwise. Indeed, Hezbollah made its support for Hariris return as PM abundantly clear, yet his attachment to conditions opposed to their interests forced the Iranian-backed party to resort to an alternative strategy.

Originally posted here:

Grappling between past and future: will Lebanon's political economy reproduce itself? - Open Democracy