Seen in isolation, the situation of Lebanon at the onset of 2022 is that of a country which is still in the depths of a mindboggling crisis. The national crisis of everything is singularly encompassing and to be grasped by the human mind needs no historic denominator, geographic comparison, or even numerical quantification of GDP contraction, annual inflation rates, currency depreciation, or increases in inequality, unemployment, and poverty. A walk through Beirut and a journey into other urban centers and outlying villages is enough to nurture a sense of unspeakable economic shock, common suffering, and utter dismay at this national tragedy being born and raised in the presence of corrupt and self-absorbed leaders. A religious founder walking the hills of the region was once purported to ask his listeners “is there anyone among you who, if his son asks for bread, will give him a stone?” Observing Lebanon, one might ask why some will treat their people, like no sentient moral person would a stray cat.
But this small slice of attractive real estate on the edge of a calamitous region, cannot be seen in isolation. Neither in time nor in its contemporary geopolitical space. This says first that without international push, the individuals and political factions entrusted by the people or by fate with the care for country and society, will not budge. Left to their own devices, they will not cease being self-absorbed, paying lipservice to their duties while incessantly violating them, and acting either corrupt or not at all. That much has been demonstrated beyond question by the past two years’ failed, aborted, or stillborn governing bodies.
Still, there is no human situation without a way forward. The financial economy is a human idea and a practice of people (public and private). This is why our turn-of-the-year issue focuses on the financial economy of Lebanon, and the need to resolve misunderstandings and deliberately mal-programmed perceptions of the financial economy components, most importantly national dealings with the International Monetary Fund (IMF) and the options that always exist when two sides negotiate in good faith. There is no reason at all to think the IMF wants Lebanon to suffer.
IMPERFECT BY DEFAULT BUT…
At this point, a program for a virtuous financial economy will by default be imperfect. The mess is so deep that any attempted solution, for example whether to still go for a currency board or how to restructure our banking sector so we do not do our competitor nations the favor of destroying our strongest economic asset ourselves, will not be free of conceptual and implementation errors. We asked the best experts that we found to give their perspectives on the financial economy, the engineering of which will have to constitute several crucial wheels in our national economic machine that has to be made to work in the coming year, lest Lebanon lose more of its qualified people and those who stay slink along life as beggars.
Thinking and tinkering with the financial economy will not be enough to begin saving Lebanon this year, however, regardless of how much international input the country might get. Two more considerations need to be undertaken. One is the continued effort, against all previous conceptual flops, communication imperfection, and current lack of power, to debate our economic future from as many angles as there are strong and justified interests. Let it be stated clearly if reiteratively: Lebanon has great business and economic minds. An abundance of talents, more than it needs. Now more than ever, the talents must not be buried.
If we want to effectively benefit from outside help, we have to help ourselves and do our part to construct the better operating system and economic machine. That is why we are publishing our Roadmap 5.0 at this time, inviting your participation in the effort to push for economic democracy where the public and private and third sector wheels finally move productively in synch, empowered by free and fair elections and by your constructive ideas. We are not only publishing an update but we are adding a new pillar, focused on enabling private sector industries and economic agency (for more details on the new pillar and our Roadmap journey, see Leader on page 8).
USING THE WIDE ANGLE LENS
The third viewing angle of our crisis of everything necessitates a look at the global picture. Gauged against any conventional wisdom and experience for country development, the paradox of the Lebanese situation at the start of 2022 is that the country has in the past year done worse, far worse, than rational thinkers would have expected. At the same time, the country has, in its social fabric and will to perform with civil decency, not deteriorated nearly as badly as some evangelists of self-abandonment and despair had promised in pessimistic scenarios of a failed society. The people’s generosity and welcoming inclusiveness has not been destroyed. There are still those who want to make this country shine as bright as it can.
However, if the optimists succeed, Lebanon might in a few years shine on a global stage considerably dimmer that it was in the first twenty years of the century. Two recent benchmark publications show the state of the world is causing growing fears at least for the next two or three years. The 2022 Global Risks Report (GRR) by the World Economic Forum (WEF), published in January, starts out with three headlines: burning societal and environmental concerns, collaborations on challenges rendered more difficult by rising inequalities under divergent economic trajectories, and the danger of a disorderly climate transition that will further exacerbate said inequalities. The GRR sees a horizon marked by increasing tensions.
About a quarter of the people polled for the 2022 GRR are worried, over 60 percent are concerned, and not even 4 percent are unrestrainedly “optimistic.” Without claiming to be scientific, this magazine’s memories of hearing Lebanese business leaders say that they are optimistic for this country, optimistic despite everything they have experienced, is a multiple of 4 percent. Note: Lebanon-based economic leaders included in a sample of some 12,000 individual leaders asked by the WEF to assess the top risks in their countries, most often cited state collapse, followed by man-made environmental damage ,and absence/collapse of social security. Global risks by comparison concentrated around climate and weather, flowed by societal risks, with economic and debt risks distant runners up.
Another report, more extensive and more authoritative than the GRR, published in January is the World Bank’s study on the Global Economic Prospects (GEP). The press announcement for this report condenses its key message by saying darkly that the global economy is entering a “pronounced slowdown.” Stating some fascinating numbers, the GEP informs, for example, that total global debt reached 263 percent of global GDP in 2020 and government debt in Emerging Markets / Developing Economies (EMDE countries) leapt up nine percentage points to 63 percent of GDP (one could only dream of Lebanon to be in the median range of EMDE public debt).
The headlines in the report’s first pages describe the global economic horizon as clouded by unprecedented macroeconomic imbalances and growing inequality within and between countries. It further sees the horizon enmeshed in exceptional uncertainty, which is further compounding in equalities. “Half or more of economies in East Asia and Pacific, Latin America and the Caribbean, and the Middle East and North Africa, and two-fifths of economies in Sub-Saharan Africa, will still be below their 2019 per capita GDP levels by 2023,” (emphasis added) it augurs broadly. To tackle those exacerbating inequities in the developing world, the GEP report proposes an agenda of “concerted effort to mobilize external resources and accelerate debt relief efforts,” plus invigorated steps for “domestic growth and innovation.”
MICRO LOOK LEBANON
Lebanon is the single MENA economy estimated in the GEP to have ended 2021 with a GDP contraction (minus 10.5 percent versus regional growth forecast to increase from around 3 percent in 2021 to 4.4 percent in 2022), and has a 99.999 percent outlook to have GDP far below 2019 numbers at the end of 2023. The World Bank did not see it fit to include Lebanon’s (nor Libya’s, Yemen’s and Syria’s) GDP estimates for 2022 and 2023 in regional numbers. The Lebanese who are told in the GER that their “new government formed in September 2021 is beginning the process of economic stabilization,” indubitably will be enamored by World Bank leaders’ promises for acceleration of debt relief efforts, and good advices on growth and innovation.
But even if there were projected numbers for Lebanon’s economic fortunes in 2022 and 2023, it has to be remembered that all the world’s models and experts have not proven any more trustworthy for predicting the mid-term or even the impending global performances, neither ahead of the 2007 Great Recession nor during the unfolding of the 2020 pandemic recession. Nonetheless, when considering the mood of impudently exuberant expectations at the start of 2007 in comparison to today’s confessed skepticism, the pained anticipation of troubles in the next three years looks more credible than past irrational exuberances.
This brings home two messages. Lebanon’s efforts for building the national economic machine in 2022 should be both holistic, i.e., encompassing all political and social and economic fronts, and self-reliant as much as any how possible. They will have to include foreign assistance and agreements but need to assume that the world community, and with it the ability to respond to the mounting needs of developing and countries and failed states, will be heavily burdened this year. Lebanon needs to use its own devices, expatriate and local, and all its purported friends, but most of all, it will have to be self-motivated to engineer a new economic democracy with the tools of state buildings and construct trustworthy contracts.
The global message is not to ignore that the past seven fat decades of global growth will have to be replaced by a paradigm of prudent resource preservation that entails much more than climate risk mitigation, appeasement of societal upheavals, and improvement of virtual spheres or cyber defenses. If the coming global shift will be disruptive for as long a period as the need for climate risk and population risk and information society risk has been ignored or improperly treated, we are in for decades of disruption, shock and denials, stagnation, fitful restoration, and recreation of our economic democracies amid ongoing uncertainty. The lessons of the crisis of everything in the Lebanese laboratory deserve to be preserved and solutions that might be tested successfully in Lebanon in the coming few years might become this country’s most productive and valuable exports. This moment in time is one to prepare for most interesting challenges, whether in Lebanon or in the world.