Our financial system needs to wake up. Once the dynamic driver of our nation’s economy, it’s long slumbered at the wheel, abandoning industry and entrepreneurial activity in favor of cozy deals on government debt. The result? Stagnant industry, few exports, a huge current account deficit and a morbidly high brain drain as our young people seek out decent employment abroad.
It wasn’t always like this. Forty years ago, young urban professionals — fresh products of the finest public education system in the region — were able to make a decent wage. They made it into the middle class because at that time, hard work was all that was required: keep your nose to the grindstone and you can afford a house, education for your children, even vacations.
At that time — just before the Civil War began — local manufacturers were internationally competitive. A dollar bought 2.25 Lebanese pounds, not 1,500 — and the pound was set to become an international forex and reserve currency. It would take nine long years of conflict and uncertainty to erode the power of the currency and push it into a death spiral.
But the Civil War didn’t just ruin the country’s purchasing power. It also pushed the banks into a deep hypnosis. After 17 years enjoying the spoils of a war economy, they became entranced by easy, risk-free government debt instruments — and in the process, they abandoned the private sector. This is an ongoing tragedy. Banks are a necessary component of any modern nation building exercise, yet today’s general managers and regulators are unwilling to take part in the risk — and reward — of new economic activities. They shy away from funding businesses unless supplicants offer up their personal assets as collateral. This deprives enterprising people with bold, innovative ideas the capacity to realize their ambitions and robs the economy of the benefits of the most important invention in capitalism: the limited liability company. Let’s not forget that without J.P. Morgan, Thomas Edison’s bright new world would never have happened with such lightning speed.
After 25 years of less than stellar rebuilding, it is time for banks to wake up and once again begin to bet on private initiative. Reconstructing a truly dynamic economy will take time, but it is the only way to drive exports, balance trade, increase jobs, raise our purchasing power and keep our youth here.
We have the human capital. All we need is the money — and the daring — to unleash this talent.