By Dana Abed and Sasha Al Hilani

Lebanon, that small country on the Mediterranean, is rocked and rotten by core inequalities, that make life today on its premises insufferable – unless you are, of course, part of the oligarchy!

For the past two years, Lebanon has been facing a deep economic calamity, causing hyperinflation,  a shrinking economy halting access to basic utilities such as water, electricity, fuel and inability to secure life-saving medicine for millions in Lebanon. But two years is not a short time – in fact, and pretty evidently, it’s enough time to enact fiscal and economic policies that would put an end to the crisis. But the ruling class has done nothing but watch, and occasionally make sexist and classist comments.

Following the harrowing Beirut port explosion that wiped out a third of the capital, the government resigned and it took 13 months to form a new one, as if the country does not need urgent reforms. On its head sits the richest person in Lebanon, Najib Mikati, worth, alone, what is equivalent to 10% of Lebanon’s GDP.

But this phenomenon, albeit a textbook example of the marriage of politics and business, is not unfamiliar to post-war Lebanon. The lines are blurred to the extent that 18 out of 20 of Lebanon’s top-ranking banks have major shareholders linked to political elites. Individuals closely linked to political elites control 43% of assets in Lebanon’s commercial banking sector, that’s not to mention the bankers who stepped into political roles over the years.

A neoliberal model, designed by and serving only those at the top

In fact, for the past four decades, the system was characterized by neoliberal policies that reflect nothing but the greed of ruling elites.

On the taxation front, the first thing that was slashed in the 1990s are taxes on corporate income profits, alleviating taxes on the personal income of the wealthy, and subsequently the ruling. Progressive taxation was eliminated in a way that a 10% flat rate tax on income replaced what was once progressive taxation, which used to reach to up to 50%. The bias tax system towards rentier-based activities was apparent as tax on interest was only introduced in 2003, and Eurobond interest incomes were exonerated until 2017, and the same goes for capital gains tax on real estate which was only introduced in 2017.

Import tariffs were slashed to become as little as 0%, reaching up to only 5% on certain goods, which was reflected in the nature of economy, that has become reliant on imports, hence disempowering citizens who relied on industry and agriculture. In sum, the fiscal system in the country was reformed to be eschewed towards indirect taxes which constitute today nearly 70% of the tax revenues. Those terrible introductions led to having solely a rentier economy in Lebanon, primarily relying on a crooked banking system, that relies on foreign deposits to sustain its model.

But fiscal policies were not the only ones reflecting inequality. Lebanon is also characterized by insane debt levels: Lebanon has  the highest debt-to-GDP ratio in the world. Any funds Lebanon would receive from abroad would go into paying the public debt, with the World Bank stating that of the 147 billion dollars that went into the Lebanese economy from 1992 to 2010, a staggering 121 billion dollars were used to cover the deficit. But the story does not end here. Lebanon’s debt is mostly owned by private banks in country, which means, debt service was enriching the pockets of those bank owners, while the economy continued to collapse, until we reached the total downfall in 2020.

Going through crisis under elite capture

This model of neoliberalism and elite capture only increased the gap between the elites and the rest of us. Pre-crisis, more than 70.6% of wealth was owned by 10% of the population. When you have this type of gap, you cannot expect decisions made during crisis to be in the best interest of the average man and woman in Lebanon. At the dawn of the crisis, the rich exercised their power through those same banks that made millions, and implemented their own version of a capital control which affected small depositors disproportionately.

In 2019, and practically overnight, the people of Lebanon woke up to find that their access to and withdrawals from bank accounts had been severely restricted. Restrictions were associated with the size of the bank account, with smaller accounts facing stricter restrictions. However, and at the same time, many of Lebanon’s political leaders used their ties to the banks to transfer their funds abroad during the start of the financial crisis in order to save themselves from the same exact policies they were implementing on their people.

On top of that, Lebanon lacks proper social protection programs to help individuals in need, thus with the restricted banking sector and failing economy, the majority of the population found themselves barely making ends meet – a recent estimate shows that 85% of the population suffers from multidimensional poverty. Add to that the random dismissal and termination of employees as many businesses could no longer afford to continue and the fact that the Lebanese pound also lost more than 92% of its value compared to the USD.

Instead of seeking any form of internal reforms and just fiscal policies, the government have sought out rescue from the IMF, currently negotiating a plan that will, most probably, be based on severe austerity that will impact the most vulnerable.

The need for immediate action to combat economic violence

The system as it is now, not only captures resources and leaves crumbles to the population, but has allowed elites to use policy making to serve their agenda. It is also a closed system where women are underrepresented, marginalized communities such as refugees, the queer community, and people with special needs are not represented and policy change is quasi-impossible. But people in Lebanon are not giving up. In 2019, millions have taken to the streets to demand immediate reforms.

While those are still to be implemented, it is increasingly important and during those times of crisis to implement fiscal policies that would, well, tax the rich! It is about time politicians and businessmen, and bankers pay their fair share, that goes towards building a social protection floor and support a productive economy, which would be a stepping stone towards recovery.  Lebanon’s 6 billionaires together accumulated $10.8 Bn in 2020.  A 10% solidarity wealth tax, $1Bn, is 3 times more what the international community pledged to help Beirut with following the Beirut port explosion.

The Lebanese collapse has been orchestrated by men in suits, at the top of the pyramid. And while inactivity is a way to avoid taking responsibility, the world should not stand, watching, a country collapse, as its ruling elites dine and wine on their superyachts!

Dana Abed is the influencing lead for Oxfam in Lebanon, and Sasha Hilani is the Research and Policy Advisor for Oxfam in Lebanon

Image Credits  

  1. Featured Image. A sewage channel runs through two Beirut neighborhoods as two skyscrapers rise in the background, illustrating the inequality in the city. Photo: Pablo Tosco/Oxfam in MENA.
  2. Photo by rashid khreiss on Unsplash, showing the aftermath of the Beirut port explosion
  3. Silos destroyed at the Beirut Port explosion. On 4 August 2020, a large amount of ammonium nitrate stored at the port of the city of Beirut, the capital of Lebanon, exploded, causing at least 207 deaths. Credit: Pablo Tosco/Oxfam in MENA
  4. Nesrine Mitias, 40, uses a candle to light her room during a blackout in Beirut on August 18, 2021. Credit: Sam Tarling/Oxfam