Lebanon Faces Imminent Economic Breakdown and Political Stalemate

The protest movement in Lebanon, which the demonstrators have called “the October revolution”, has entered its second month. Born out of a refusal to adopt austerity measures to respond to a deep economic and financial crisis, the movement rejects a corrupt and discredited political class. As protesters continue to rally after the government's resignation on October 28, political negotiations seem to have reached a stalemate. The worsening economic situation is a cause for concern, while the political-community factions, heirs to the civil war militias, are on the defensive but retain the means to divide the population through the threat of violence.

A Sectarian Political Economy that Has Reached Its Limits

These protests reflect the exhaustion of a political and economic system put in place in the 1990s, where the acceptance of the sectarian system was matched by an unequal redistribution of services, jobs, and economic rents, which offered the appearance of protection in the aftermath of a long civil conflict. During the reconstruction years, under the leadership of the President of the Council Rafiq Hariri, priority was given to the financial sector, tourism, and real estate. Since 1997, the parity between the Lebanese pound and the American dollar has attracted Arab capital and financed the state’s growing debt. But public spending has proven to be unproductive, yielding a civil service both large (300,000 people including 120,000 in the armed forces and security services) and inefficient, recruited on clientelist criteria; dysfunctional public services, such as Electricité du Liban, which experiences power cuts of eight hours per day on average; and catastrophic waste management that pollutes the environment heavily and has already generated a strong protest movement in 2015 without any lasting solution being adopted. The economy offers few opportunities for young people, who end up migrating. Inequalities are considerable: 1% of the population accounts for 25% of income, the richest 10% share 55% while the poorest 50% share 10% of national income. Poverty affects 27% of the population and 35% of youth.

The economic crisis in the Gulf and the US sanctions against Iran and Hezbollah, which have reduced cash inflows into the country, add to these difficulties and have brought the Lebanese rentier model to its knees. In October 2019, the austerity measures taken by donors in exchange for new funding were only the straw that broke the camel's back.

An Unprecedented United Movement

The protest movement is calling for the formation of a government of experts to break with the political forces in place, to deal with the economic and financial crisis. The protesters have proven able to renew their forms of mobilization, marked by non-violence. In addition to the demonstrations gathering large crowds, the occupation of the country's main squares and the reappropriation of many public spaces, as well as roadblocks or sit-ins in front of institutions symbolizing the failure of the system, including the Parliament—which was prevented from meeting to pass a law on self-amnesty of economic crimes—social networks play a central role. Experts close to the movement have published several roadmaps with many reform proposals.

Unlike the aftermath of Rafiq Hariri’s assassination in 2005 when religious divisions quickly took over, the main asset of the movement today is that it has maintained its unity between the country’s different regions and communities. The very active participation of the Tripolitans in the North, as well as the unprecedented participation of the Shia majority cities of the South or the Beqaa, symbolize this unity. Young people (students and even high school students) and women are particularly visible.

This does not mean that class, geographical, or community divisions are abolished, however. People still give lots of support to the parties. Some regions seem less mobilized (such as the large Christian city of Zahle). While the impoverished middle classes are mobilizing strongly, the participation of the most disadvantaged categories, very noticeable in the first few days, seems to have decreased thereafter.

A Political Class Both Split and Tensed Concerning Its Interests

The political class reacted in a variety of ways. The reforms initially announced by the head of government Saad Hariri were denounced as cosmetic and unattainable by the protesters. The President of the Republic Michel Aoun, who was initially hostile to the movement, now says he understands it but criticizes the demonstrators’ refusal to negotiate.

While expressing solidarity with the denunciation of corruption and economic concerns, Hezbollah's Secretary General Hassan Nasrallah denounced the intervention of foreigners and expressed his fear of a vacuum.

Saad Hariri's resignation on October 28 opened a new phase of negotiations that have stalled. Political calculations have resumed once again, in defiance of constitutional procedures. They concern the composition of the new government and the proportion of experts in proportion to the representatives of political parties, whereas the latter already hold all the cogs of institutional power, in particular Parliament. Each political group seeks to defend its own interests, to the detriment of those of its competitors. Hezbollah appears to be particularly in a defensive position, caught between its desire to preserve its allies in government who provide a cover for its policy of resistance to Israel (and therefore its armament and military autonomy), and the sympathy of a large part of its supporters for claims against corruption and their concern over the economic crisis.

A Threat of Economic Breakdown and Return of Partisan Violence

The accelerating financial and economic crisis is now the main factor affecting political developments. In fear of a government that would shed light on their past actions, the dominant parties are procrastinating. The scarcity of dollars leads to the devaluation of the Lebanese pound on the secondary market. It hinders the activity of traders, especially those who depend on imports. The fuel, flour, and medicines sectors are facing severe tensions. The stability of the banking system is threatened: de facto, the convertibility of foreign currency accounts has been suspended or restricted, as has the export of capital. Banks have alternated periods of closure and opening in order not only to stem withdrawals but also to protect staff from attacks from customers made desperate by the situation. The government is facing repayment deadlines at the end of November, but its solvency seems compromised. Experts close to the protesters recommend that a restructuring of the public debt largely held by Lebanese banks be organized as soon as possible, by taxing past profits and setting up a social safety net for the most disadvantaged. The implementation of these measures depends on the cooperation of a political class that seems to have other priorities. The financial collapse risks radicalizing those who will pay the costs, especially if no signs of justice are given.

Even if this month of protests went by with a minimum of violence if we compare Lebanon to Iraq, Iran, Hong Kong, or Chile, the mobilizations went through several episodes of tension. Militias and armed groups associated with the main political parties have the capacity to defend their territories and leaders. Armed groups linked to the Amal and Hezbollah parties have repeatedly attacked areas held by demonstrators. In a choreography clearly referring to the civil war, the Lebanese Forces temporarily blocked the Nahr el Kalb tunnel at the entrance to the Kesrouan region, where this political group has a strong presence. On November 12, after a soldier “accidentally” killed a demonstrator close to the Progressive Socialist Party linked to the Druze leader Walid Jumblatt, the tension came close to triggering a cycle of violent retaliation.

A fragile national symbol, the army struggles to impose its authority in the face of tensions and is quickly suspected of serving either partisan interests or the regime. The military has a lot to lose with a budgetary screw-turn. The reactivation of the cleavages in the country is still a possibility. It remains to be seen whether economic chaos or violence can be a winning bet for the political forces in place. The worst may not be certain, and that is what protesters hope. Otherwise, there is likely to be a vast destabilization of Lebanon and powerful emigration of its middle classes, who will have the means to leave.

Text initially published on November 21, 2019.

English version by Miriam Périer and Caitlin Gordon Walker

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