When the economy slows, unemployment rises and consumption slumps, smart policymakers blow the dust off their Keynesian economics books and try to figure out which amount of government expenditure coupled with tax cuts would make optimal capital available to stimulate a prosperous cycle. Meanwhile central bankers decrease interest rates to make sure that this same capital does not end up in savings accounts. It worked in the US, Europe is getting inspired but of course our policymakers still find economics a bewildering topic.
While our successive governments have, for the most part, failed to do their jobs, to his credit, central bank Governor Riad Salameh has stepped up to the plate. The Lebanese central bank has actually done things in the past three years to incentivize economic growth. What is out of the ordinary is that Salameh’s stimulus packages that have helped the economy inch forward are Keynesian at heart.
Simply put, Salameh was ingeniously able to think beyond monetary policy into the fiscal policy sphere, thus triggering expenditure using central bank initiatives despite our dollar peg and current global interest rate environment both tying his hands. But we will need much more to continue weathering a storm that does not seem likely to blow over anytime soon. We need a courageous government to decrease taxes so that people and corporates have more capital to spend or invest.
At a time when companies are suffering and tourists are not coming in the numbers we saw five years ago, the government must allow companies to return to profitability. Companies must invest what they are earning to grow and employ while we all need to make sure that our politicians keep their hands out of our pockets, gambling with our sweat on their political agendas.