The economic plan is primarily focused on financial restructuring and only pays lip service to other key necessary components that solve underlying problems.
by Wissam Yafi -Source: Annahar
Anti-government protesters stand in front of soldiers on a highway as they carry placards in Arabic that read “your salary has become $180,” referring to the minimum wage in Lebanon, “$ = 4,500 Lebanese pounds,” and “what are you waiting for,” in the town of Zouk Mosbeh, north of Beirut, Lebanon, Monday, April 27, 2020. (AP Photo)
Lebanon’s cabinet recently announced an economic plan that focused on lifting Lebanon out of its current financial meltdown. Welcomed by some as an effort to at least do something, serious questions remain as to whether such a plan is capable of addressing the country’s mounting problems.
That Lebanon needs a reform plan is unquestionable. The Lebanese have been demanding it; so has the international community as a precondition for any support. It is therefore understandable that the government would want to present such a plan in an effort to provide a semblance of policy. The problem with the plan however is that it is focused uniquely on economic aspects and barely addresses underlying problems. As economists are paraded on TV and social media to analyze the plan, there is a more basic question that is not being asked: Does economic reform equate to the true reform needed? To answer this question, we need to look at three factors.
Economic reform without a political will to reform is like trying to fly a plane without an engine- it won’t be going anywhere soon; and if it were already flying, it will come crashing down at some point. True economic reform requires political will. In most cases, this means that those in power for decades would be willing to give up privileges that they’ve enjoyed at the people’s expense. As a small example, curbing the fiscal deficit means the political class would cease corrupt contracts, appointing cronies, running institutions dry, or insisting on policies that may hurt the plan (nationally or internationally). At this point, there is no evidence whatsoever that Lebanon’s political class is willing to do any of this. In fact, it appears that they are quite content at keeping the status quo, continuing tried and failed methods, and leaning on a desperate population to pay for the mismanagement.
Comprehensive Multi-disciplinary Reform
The economic plan is primarily focused on financial restructuring and only pays lip service to other key necessary components that solve underlying problems. Let us remember that previous economic plans, as this one, were also written by heavyweight consultants from Booz Allen, McKinsey, as this latest one by Lazard. All contained good ideas; and arguably few technical economic glitches. What they lacked is a multi-disciplinary reform approach that would have brought the necessary political, economic, social, judicial, institutional, and perhaps even environmental factors to buttress the reform plan. After all, how does one solve the electricity problem, without reforming social, judicial, and institutional elements? How does one turn Lebanon into a net exporter if the wrong educational, labor, and judicial elements are missing? The current economic plan was not designed to provide comprehensive reform; and as a result, will inevitably live in isolation and be constrained by Lebanon’s political idiosyncrasies.
The dilemma with popular support is while it is direly needed for any and all types of serious reform, it is inversely proportional to the degree of pain that the population will have to bear. Meaning, the more fundamental and painful the reform, the less likely popular support would be given. As it stands, the government is demanding a laundry list that will most likely include devaluation, capital controls, haircuts, and taxes—all without giving the population anything in return. The single most important question that the people need to ask this government and the political class standing behind it is: What are you giving the people in return for all the pain and what are the underlying institutional, let alone constitutional, guarantees? If one considers that in Lebanon the historical average life of a cabinet is about eighteen months; and that there is almost no continuity, one would quickly conclude that the value of this plan is hardly worth the ink on its paper. This plan at face value is nothing more than a plan.
In conclusion, Lebanon’s problems are deep, and the solutions required will need to reach the very same level of depth to have any effect. Government’s economic varnish no longer covers Lebanese political class rot. Lebanon’s current meltdown is so calamitous and will be so costly on the Lebanese population that it makes any swift economic plan and PowerPoint presentations futile. This plan, as the ones before it, have all led to little, if any, execution or fulfillment of promises. In this, I would echo the Prime Minister’s words when he said “Mabrouk Lebanon” (Congratulations Lebanon). But I would not do it based on expected results; rather the hope that in all the hopelessness, the Lebanese will finally realize that only true comprehensive reform, which includes political, economic, social, and judicial structural changes can turn the tide and bring the nation back to safe shores.
Wissam Yafi is an author, technologist and economic development practitioner. He has written books on democracy in Lebanon and the Middle East, with “Inevitable Democracy in the Arab World” published by Palgrave MacMillan. Yafi has lectured at Harvard, Stanford, and Georgetown. His latest research centers on how a Bill of Rights can serve as a counterweight instrument to correct dysfunctional constitutions in Lebanon and the Middle East. Yafi is a Lebanese expat and graduate of Harvard’s Kennedy School of Government.