ExecutiveMagazine - 6/10/2019 12:29:46 PM - GMT (+2 )
A potentially important step toward a new social contract
As a democracy, Lebanon has a sovereign. This sovereign—which the constitution affirms to be the people of Lebanon—has, for the longest time, appeared remarkably unconcerned over a very specific dereliction of duty by its public officials. The dereliction in question was the government’s serial failure to produce a sane, credible, and timely budget, and the sovereign indifference was the near universal quietude over the failure. Moreover, such practical irreverence of the budget’s crucial functions has festered in the Lebanese political body and government since the days of the elder Hariri until last year, when a late and astonishingly unrealistic budget was rushed through.
Although the Lebanese body politic has, over the years, become increasingly irate about the corruption of its many political chieftains, complaining that thieves, hoodlums, and incompetents run their polity, the same body politic did for many years not take to the streets to demand a responsible budget from its cabinet. Thus, while the politicians did not produce, the people did not insist on their acting responsibly. Small voices of the people and civil society stakeholders calling for a budget were academic, self-interested, anemic, and ineffective.
It would be a waste of energy to try and list all the reasons for this specific non-performance of state and citizens, even as the civic and public budgetary indifference were related to the country’s being overburdened with existential concerns. However, this past state of budgetary affairs is nonetheless galling in practical and philosophical terms. This is because everybody with even the most rudimentary understanding of anything resembling political economy should understand that a Lebanese state with no budget is a Phoenician trireme lost among dangerous reefs before an unknown coast.
In this sense, anybody examining the risk that a budget-less course meant for the ship of the Lebanese state and its crew of many communities, could not pretend that the perils were not mounting. Nor could one assume that nonexistent budgets would result in just a tiny and diminishing smidgeon of deficiencies—these deficiencies had to accumulate and were moreover incorrigible. You simply cannot ameliorate by one iota something that does not exist.
And yet, over the many years of a state without a budget, it would have been quite the delusion to expect any Lebanese group to have donned their yellow vests to scream in public and protest that the management of their free and independent nation was conducted by core constitutional institutions—the legislative and the executive branches of government—without diligent observation of their duty to issue and implement an annual state budget. It would have been even incomparably more utopian to ask the people to volunteer personal sacrifices for the national wellbeing.
Now, in late May 2019, the Lebanese people have been presented with a reformist budget. The first thing that must be acknowledged about the process of designing this budget is that the involved ministers and the parties they represent sent out signals of sincerity and seriousness. But it also is clear that in 2019, the chickens of years of waste and indifference have come home to roost. They did so in two forms.
On one hand, citizens concerned over the assumed loss of their entitlements rose up in protests that were often described as preemptive. Case by case, these protests may or may not have had validity as material concerns. Taken all together, the protests also may have, as some experts allege, conveyed to international observers that the new budget has real austerity teeth.
But in another perspective of these protests, which in May 2019 often looked premature more than anything else, would be to consider them as multifaceted signal that Lebanese people have learned to distrust their government in response to innumerable deceits they were subjected to by their leaders in the last 20-30 years. At the same time, however, as “preemptive strikes”—a word choice that, at least in peace-oriented thinking, smacks of morally repugnant military actions—in defense of entitlements, the hasty protests did not smell healthy against the background of the public’s previous indifference concerning the state’s ability to finance an increasingly burdensome range of entitlements. Nor did they serve to reduce concerns over the likelihood of future social conflicts that could result in economic damages of magnitudes that are in no proportion to the value of the entitlements that various social groups might be seeking to protect.
With regard to the interpretations of the budget process by international and local analysts, the budget draft and its design process were met with the degrees of skepticism that must be expected from herds of economists. As analyst perspectives are informed by the past performance of the objects or matters they study, examinations of the 2019 budget and of different scenarios of fiscal and economic developments of Lebanon in the next few years, struck the reader as anything from being tainted by disappointment of failed and insincere political promises in the past quarter century to containing heavy doses of questionable economic modeling and vulnerable assumptions.
Much remains to be done
The experts on all sides, and in all international institutional stakeholders in the Lebanese reform process, have, of course, still much to do in pouring over the figures and implications of the 2019 budget, but it would not be the wisest thing to assume that this budget and its confessed target figures on revenue enhancements, waste cutting, etc., already constitute a trustworthy treasure map that is viable for setting the Lebanese state’s fiscal course over the next three to four years.
Whereas the recent views of experts thus vary from emphasis on the 2019 budget’s short-term importance for the state’s ability to stave off financial draining of hard currency and instill investors with new confidence, to a medium-term focus of the budget’s alleged potential to improve fiscal balance and real GDP growth, or create a turning point in the evolution of Lebanon’s debt-to-GDP ratio, such narratives are all constructs produced under conditions of uncertainty.
The only thing that one might assume with a reasonable degree of probability is that the next budget will not be perfect. The draft and resulting 2019 budget law cannot be expected to be void of miscalculations and understated cost expectations, regardless of the number of sessions and hours of deliberations which are invested at the levels of executive (Council of Ministers) and legislative (Parliament).
But on the philosophical upside of all this, the struggle for a new budget in Lebanon can and should trigger much more than a fiscal discussion for the year 2019 with implications for the coming years and the five-year deficit reduction targets that Lebanon has made commitments to in April 2018.
As practical measure for improving the management of Lebanon’s political economy in the coming period, the budget imposes the sacrifices that people will not commit to otherwise. As such, the budget may save the state’s economic neck.
However, the budget can potentially also be an important step toward a new social contract. Devising of new social contracts is a universal challenge and issue of concern to societies around the world these days, as new contracts are needed for the age where the previous liberal democracy model—which since the mid-20th century postulated that the combination of free markets and liberal democracies to be unbeatable for the improvement of peoples’ prosperity and wellbeing—can no longer be sold as the one and only winning ideology for existence in a simultaneously fractured and digitized global community with new definitions of the wealth of societies, global progress, sustainability, and environmental and social priorities.
In the fading age of liberal democracies under American political-economic tutelage and claims to ideological leadership, social contract thinking was informed importantly by the philosophy—formulated by American thinker John Rawls almost 50 years ago—that a society of reasonable people will acknowledge the primacy of liberty as well as the reality of inequality in economic existence. But this understanding is not complete without the mandate that a social contract in such context must ascertain that unequal distribution of wealth is beneficial to the least advantaged members of society without any ambiguity. For a country, this philosophical aim is the moral mandate to structure society in such ways that unequal distribution of economic assets leaves the least-advantaged people better off than they would be under any other form of economic distribution.
It must be said that Lebanon, under its social contract with its rentier and entitlement drivers from the post-civil war years until today, has not made any progress toward implementing a society where the least-advantaged are better off. While unequal distribution was the country’s most prominent economic and social determinant for the last 25 years—arguably much more than the oft-debated consociationalism of the political system and even more than the proverbial entrepreneurial orientation of the Lebanese—the failure of this system to benefit the least-advantaged among Lebanon’s people is undeniable. Poverty rates tell the story that the opposite has been happening.
From this vantage point of seeing the 2019 budget not only as something practical that is needed for the survival of the Lebanese nation and its protection against international financial interventions that would be even costlier to the people than the new avowedly reformist and restrictive budget, the viability test will be not if the percentage targets for deficit reduction, revenue generation, and other ratios are realized with digestible margins of error. The philosophical test for the budget will be if it will improve the lives of the least advantaged and bring Lebanon closer to developing a new social contract.