In Executive’s view of things that happened locally in January 2019, three incidents testified to the presence—and the perils of—irrational expectations. Such expectations actually work in two directions, with different attendant risks: The first direction is that of excessive enthusiasm, very well-known to the economically literate from the last global exposure to “irrational exuberance,” in the build-up to the Great Recession of 2007 —2009. The second, and even greater, danger of irrational expectations comes from the negative: the numbness of despair, the rage induced by fear, and, worst of all, the animalistic blindness of mindless panic.
No one should and nobody—unless working with an ulterior motive—would pretend that there is any serious chance of irrational exuberance when contemplating the future of the Lebanese economy at the start of 2019. Neither does the country today harbor grand messianic expectations of another national political savior, as a conflict-fatigued people did in Lebanon some 27 years ago, when the national perspective shifted from the immense exhaustion of internal conflicts to the enthusiasm of Rafik Hariri’s reconstruction drive and Horizon 2000 plans. The swing from desperation to confidence at the time was memorably reflected in the successful rescue of the Lebanese lira and its shift from radical depreciation before December 1992 to controlled stability ever since the mid-nineties.
While it would be a waste of time to warn of irrational exuberance in Lebanon at the threshold of what could be a new horizon for the 2020s and beyond, it seems most appropriate and prudent to regard the risks of irrationally negative expectations. Gloomy sentiments are ever-present in the country today, as demonstrated and exacerbated last month by the Arab League Economic and Social Development Summit (AESD Summit), the continuing lack of government and national vision, and the downgrade of the sovereign risk. Containing the spread of irrational negative expectations is a worthy cause, and one that might entail an immunity-building exercise in rational uncertainty.
As a mental approach, rational uncertainty proposes using the toolset of rational evaluation rather than succumbing to ideological gloom, willful propaganda or, God forbid, blind panic, when contemplating the radical uncertainty of Lebanese existence.
The rational uncertainty approach contains two elements: First, the acknowledgement that uncertainty is the only certainty we can ever truly have. Uncertainty cannot be eliminated; it is what remains once we strip off the mental assumptions that one might predict the future from the past or extrapolate unknown pasts from the present. Uncertainty rules universal, and this means that no one can reasonably argue that nothing about the Lebanese state could ever get worse, or that nothing in Lebanon could ever improve.
Second, we should remind ourselves that there is always more than one possibility ahead. It is our rationality that allows and maintains our determination toward building a better future, rather than falling into depression over the possibility of a worse one.
The first and, theoretically, most monumental agenda item for Lebanon last month was the hosting of the AESD Summit. This event was an operational and organizational victory but, in Executive’s analysis, not a significant win.
The not inexpensive gathering produced nothing glorious and report-worthy in terms of either Arab regional progress to a new and better performance of national economies or decisive strengthening of under-designed and overextended social safety networks in Arab League member states. Nor did the assembled dignitaries leave most Lebanese with increased hopes for more regional economic growth through better trade and customs agreements, or for Arab-owned solutions to the Syrian refugee situation and the reconstruction challenges posed by devastation in certain Arab countries.
It is no surprise then that this AESD Summit was barely mentioned in the international press, nor that the only local benefits noted by Executive editors were temporary relief from Beirut’s insane traffic and joy to those children who were given time off from school.
From a local vantage point, it can also be noted that some of the desired elements of the summit—like the presence of Arab heads of states—were not the decisive missing factors that prevented this summit from being successful. In fact, when examined with the toolkit of rational uncertainty, the summit was not hopeless. Uncertainty should allow for the possibility that future efforts for economic and social development in this region still may succeed, just as rational evaluation (based on speeches and closing communiques) finds that the meaningful elements missing from the AESD Summit were analysis, cohesion, debate, compromise, transparency, and a will to change.
The second report-worthy event, in the perception of Executive editors, was the loss of a bet. The substance of this bet, made on the first workday of 2019, was whether government formation would happen before or after January 19. The wager was modest, a stein of draft beer at a local resto pub, which by its diminutive size reflected the sad fact that no serious bet on Lebanese political sanity appeared viable to any of us at Executive. Needless to say, the bet that cabinet would be formed in time for Beirut to host its first regional political summit on Arab League level in almost 17 years was lost.
However, it must be noted here that both bettors felt like winners, because they enjoyed the settling of the bet in the affable company of friends—Lebanon was the real losing party. Executive’s reluctant conclusion was that making any bet and wagering any hope on a moment when strategic political insights would be delivered to political players is not within rational reach.
This suggests for the medium term (even after the surprise cabinet formation on January 31), it is not advisable to have exuberant expectations of an efficient government or reform process. Yet again, the agenda of proposed reforms (see story 20) and the—ever so fanciful and outsourced—national economic vision for Lebanon 2025 and 2035 deserve the benefit of the doubt. Executive is certainly determined to stay on the reform and development ball—including taking our own advocacy and economic plan forward through inclusive discussion and rational passion—in 2019. We will be relentlessly expanding our efforts to support and augment whatever vision we find credible, regardless of its author’s name or affiliation (currently at 230 measures).
A third event of note on the Lebanese stage of puerile politics reminded Executive editors of the dramatic power of ill-spoken words. Anyone in a stable relationship is—or at least should be—aware that the effort to repair the impact of a carelessly uttered affront to a loved one can be a hundred times as arduous as the effort of uttering the stupid and damaging phrase.
In this regard, modern finance appears to be just as sensitive and vulnerable as the—infinitely more valuable—relationship of stable trust and love in a married couple or between a good leader and the people. Case in point: the ominous two words—“debt restructuring”—that reminded Lebanon and its international partners last month of the importance of sticking to a careful approach of rational uncertainty. At least that was the translation of a comment by Lebanon’s then-caretaker finance minister Ali Hassan Khalil that appeared in English-language media, causing frenzied trading for a period that was short but still far too long. It even appears to have caused panicked comments by normally cool financial observers, seen, for example, in the atypical quick formulation and issuance of a downgrade in Lebanon’s sovereign rating by respected international agency Moody’s.
This serves to emphasize how the power of a bad word in such vulnerable times could generate very bad outcomes, if the country’s internal and external markets and investors succumb to irrational fears instead of maintaining a cool, rational assessment of uncertainty.
An approach of rational uncertainty may even be prudent when looking at the state of the world. It certainly seems appropriate in considering our Lebanese state—which, nota bene, at 99 years of age still has some charms, and not a little potential.