Alice welcomed us into her crammed street-level apartment right off a narrow street with tangled electricity cables in Nabaa, a suburb near Beirut. Alongside her daughter and 2-year-old grandson, she shared their harrowing story of coping as Lebanon’s economy continues to plummet. Despite her age (early 60s) and feeble body, Madame Alice — as she introduced herself — has found herself working again, rummaging through garbage bins in a nearby neighborhood for recyclable cans that she could sell for every week for a few dollars.
My heart sank into my stomach as I translated her story to a correspondent and crew from an international television news channel. Though this isn’t a new phenomenon in Lebanon’s plethora of neglected towns and communities, families such as this one have dealt a new blow in Lebanon’s worsening economic crisis.
Over the past 30 years, Lebanon has relentlessly tried to maintain an absurd economic system, best described as a toxic concoction of sectarianism, territorialism and laissez-faire capitalism. Its bloated public sector is used as a tool to win political loyalty and votes, with virtually no public spending on public health care, education and other necessary social programs. Though there have been warning signs of economic collapse for the last year, a regressive tax on WhatsApp last October finally sparked an uprising that has entered its fourth month.
Now the economy is in free fall. Prices continue to skyrocket, and U.S. dollar shortages have caused import shortages of essential medicines, wheat and fuel since last fall. Lebanese customers at their local banks struggle to withdraw roughly $200 every two weeks. The more money you have in your account, the higher your withdrawal limit.
And therein lies the problem — the pervasive inequality that this system has propped up for decades. Unfortunately, there is every sign that things could get worse.
No longer able to kick the can down the road, the Lebanese government sent a request for nonbinding technical assistance from the International Monetary Fund. Talks started on Feb. 20. Lebanon — with one of the highest debt-to-GDP ratios in the world, exceeding 150 percent — has to pay a series of Eurobonds that add up to $1.2 billion in March. However, for the first time, it may not be able to pay them.
Is this the prelude to an IMF bailout? Perhaps. Lebanese Prime Minister Hassan Diab said “painful” measures are necessary to salvage the economy. Echoing the sentiment of his predecessors, he is referring to austerity measures, additional regressive taxes and additional cuts to public spending.
The IMF concluded, following an audit last year, that Lebanon should, among other measures, increase its value-added tax from 11 percent to 15 or 20 percent, end state subsidies on the inefficient electricity company and hike electricity bills, and tax fuel at gas stations.
Given that these reforms are not out of line with the conditions necessary to unlock a hefty $11.1 billion in loans pledged in Paris in April 2018 for infrastructure development, the government could see this as striking two birds with one stone.
What does all this mean for working Lebanese people? Simply put, it spells disaster.
A large segment of Lebanese households rely on public-sector jobs to make ends meet. A hike in prices and cuts to rank-and-file public-sector jobs and salaries will spiral tens of thousands of people into poverty. At the same time, while unemployment continues to surge, Lebanon’s lethargic social security program is still waiting for money the state owes. Meanwhile, the wealth of Lebanese billionaires alone makes up on average 20 percent of the country’s national income — twice the figure in the United States.
There’s also the question of alleviating Lebanon’s rampant corruption, including black-market cash cows such as its informal electricity and water services. Some make the case that privatization and austerity would at least set Lebanon in a positive direction. But privatization and corruption are not mutually exclusive. In post-Soviet Albania in the 1990s, corruption skyrocketed following IMF-mandated privatization of hundreds of state assets.
Protestors haven’t stayed silent while all of this has unfolded. One group has even drafted an “alternative” Cabinet policy statement that better reflects the demands of those demonstrating. They want a more aggressive pathway to an independent judiciary that can take on corruption, a progressive taxation system and the reallocation of wasteful spending toward programs that protect Lebanese people.
While protesters see economic recovery through the lens of protecting the most vulnerable, the country’s decision-makers see economic recovery as protecting themselves. But Lebanon’s elites also cannot tread freely as they once did, with citizens now mobilizing within minutes when they feel injustice is brewing.
So Lebanon’s ruling elite is at a crossroads: They could pave the way for a future when the elderly, such as Madame Alice, can retire gracefully, and when the next generation of children, such as her grandson, can be the masters of their own destiny.
Or they can save themselves and sweep all of the country’s socioeconomic problems under the rug — business as usual.
Kareem Chehayeb is a Lebanese journalist and researcher based in Beirut.