Lebanon Tragedy: An opportunity for long-term reforms

Policy-making must not be seized by capitalists, religious groups or other political parties who have little or no interest in development.
by Dr. Nancy Kanbar

25 May 2019 | 11:50

Source: by Annahar

  • by Dr. Nancy Kanbar
  • Source: Annahar
  • Last update: 25 May 2019 | 11:50

Riot police stand guard, as retired Lebanese soldiers burn tires during a protest in front of the government building, in Beirut, Lebanon, Monday, May 20, 2019. (AP Photo)

BEIRUT: The current alarming financial crisis may mark the start of a new chapter in the history of Lebanon.

After delays for about two years, a new president was elected with much public support and many expectations on safeguarding human welfare. After extensive deliberations that lasted for about nine months, a new cabinet was born. A new president and a new cabinet are expected to improve the system; thus, an opportunity to make long-term reforms.

Citizens are waiting for drastic changes; not for mere budget cuts that target public servants’ wages, social and health benefits. Lebanon has the third highest debt to GDP ratio, the worst rated sovereign debt, and the highest debt service: a tragedy caused by unremitting fiscal deficits accrued by former governments. A comprehensive plan with long-term reforms is demanded to evade social and economic challenges.

Politicians need to review the budget using objective and scientific methodologies based on solid reforms. A comprehensive plan founded on respect for the dignity of the Lebanese is needed. Politicians are required to regain the people’s trust through a trust-building process that considers: 1) re-examining the laws on illicit enrichment, 2) scrutinizing any conflict of interest and abuse of public office throughout the last decades, 3) punishing misuse of official information, and 4) granting open data access to Lebanese scientists and experts who can use their professional competencies to serve the country. Enhancing citizens’ trust in the government is instrumental to promote sociopolitical democracy. It is about time for Lebanese politicians to deviate from utilizing the “eye of an accountant” aiming to make budget cuts to utilizing the “eye of an economist” portraying a holistic view with reforms.

Long-term reforms should consider the following:

Policy-making must not be seized by capitalists, religious groups or other political parties who have little or no interest in development. Though Lebanese treasure that the formal structure of their country is democratic; unfortunately, Lebanon is not governed ‘to further the best interests of its citizens.

Influential groups have full command to define “social” goals, according to their own “private” gains (Tragedy of the Commons). Due to economic, financial and political hegemony, a “democratic” nation may in practice be an oligarchy, a form of government in which power is vested in few dominant individuals. Thus, we cannot assume that formal structures of democracy would necessarily lead to policies that are in the best interest of the majority. It is vital to re-examine the linkages between the political economy and the socio-economic policy-making.

Scientists should not make political trade-offs. When trying to resolve complex challenges that have socio-economic repercussions, experts complain of “too much politics” and they often express frustration about how policy debates unfold. They believe that “good science” is not being given enough credence in policy-making. It is essential to reinforce a better balance between science and politics by ensuring that scientific input is sincerely considered. If the science could be isolated from political disputes, the science by itself could identify good policy choices.

It is evident that it would be difficult to get someone to adopt a position on an issue when their job depends on him not adopting that position. It is useless to argue with a policy-maker whose opinion is based upon personal interests.

Lately, the Washington Post proclaims that politicians and their families control one-third of the banking assets. It states: “because Lebanese banks own about 85% of the debt, these payments profit the very political leaders sinking Lebanon deeper into debt”. Also, delays in forming the cabinet were mainly caused by political parties fighting over specific ministries that have superior budgets. Only in rare cases, top-level appointments are based on expertise and credibility. Lebanon is broke because they were ineffective and incompetent politicians who consistently spent more money that they could raise, and they borrowed and continued borrowing for decades. It is immoral to ask ordinary taxpayers to pick up a tab for failed politicians. Politicians themselves are the drivers of what the citizens are suffering of; thus, they will be better off restoring the citizens’ trust by adopting measures to stop corruption and penalize those responsible for the debt accumulated through previous years. System restructuring by appointing competent and credible policy-makers is of utmost priority.

It is true that the McKinsey report found it alarming that two-thirds of the budget is allocated to wages of public employees and it recommended freezing employment. Yet, caution should be used when diagnosing the ‘real’ problem: Is this the fault of the public sector employees? Or is this the responsibility of politicians who made the wide-ranging hiring before elections without any consideration? Politicians should be vigilant; otherwise, they will not be able to restrain social discontent.

Lebanon is not a “poor” country; it is rich in resources, but these are “mismanaged”- to say the least. The government should seize the opportunity for a corrective path towards developing a comprehensive economic plan. Politicians have hired an international consulting firm to develop an economic vision for Lebanon (maybe by lack of trust in the expertise of local scientists and economists- a dangerous situation to be discussed later!). Before finalizing the national budget, politicians are invited to make use of McKinzey recommendations: 1) allocate money to improve the productive sectors; 2) build flagship projects, such the “Smart Lebanon” initiative that would foster knowledge economy; 3) focus on production and services based on knowledge-intensive activities; such as technology and digital services, outsourcing and business services, creative industries, financial services, as well as education; 4) build Beirut Knowledge Village, etc.

A thorough analysis of the aforementioned recommendations reveals that the main component of all suggested activities relies on the intellectual capabilities of the Lebanese people. Thus, it is essential to highlight the intellectual capital component by allocating the proper budget needed to reinforce all public schools and the only public institution of higher education, the Lebanese University, which serves about 85,000 students, constituting approximately half of the total number of students in institutions of higher education in Lebanon.

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Dr. Nancy Kanbar is a member of the Faculty of Economics and Business Administration at the Lebanese University.

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