ExecutiveMagazine - 10/7/2019 11:55:17 AM - GMT (+2 )
The end of September is supposed to be good, bringing with it a general relief from summertime inertia, and sizzling with new economic energy as the business season gears up toward the best time of the year. This is supposed to be a season that yields a mix of harvests from successful endeavors and new projects in preparation of the coming year, which indeed should be most auspicious for Lebanon if history adheres to the idea of favoring perfectly round anniversaries.
What is going on?!? While the people watch Lebanon stumble and tumble into the fourth quarter of 2019 accompanied by a cacophony of rumors about the dollar, helpless ruminations by hapless politicians, and popular protests driven presumably by activists and determined minorities, everything looks possible—and most of it bad.
The shocks last month hit fast and seemingly out of the blue. They were shocks not felt for a generation and more, money-related shocks such as people waking up to learn that their lira in practice was not buying dollars at the rate that it had since 1997 with no single interruption. There were shocks when banking customers without warning were denied the cross-currency interchangeable ATM withdrawals of lira and dollars that they still could do a few days earlier, shocks of people witnessing their ATMs out of money, and shocks when long-term account owners asking for their money got harebrained excuses and delaying tactics from bank tellers and branch managers.
To make no mistake, the shocks could have been much more painful if the underlying tremors in the financial system had truly been existential. The dimensions of the suddenly forming parallel currency exchange market and the exchange rates found there were in the single-digit percent range and thus minor disturbances when compared with historic currency shocks in fragile economies or ongoing black market trends in countries such as Argentina or Zimbabwe.
Nonetheless, people became fearful and felt stranded. Official Lebanon, already not a beacon of trust in the citizens’ minds, let crucial time pass by without issuing convincing explanations on what was happening at the exchange offices, ATMs, and bank counters. Banks and the Association of Banks in Lebanon seemed to see no need to address the public with timeliness and clarity. We would have expected a coordinated message from our banking industry to explain the situation to their customers and counter the rumors and fears that spread rapidly. Instead, it seemed as though the rules changed daily, with different banks operating different polices. Our banks should not have expected anything but panic and rage to ensue by brushing off legitimate concerns with vague assurances, leaving their customers exposed to nothing but rumors, incomplete information, and conspiracy tales.
But such rage, as understandable and as consistent with human behavior as it is, does not solve anything. Fear and instinctive self-interest are two horribly bad advisers in making economic moves. This is one thing to remember when assessing the current mess and the outlook for the next two quarters—or roughly the time until the end of 2019 and the first few months in 2020.
Opinion makers and analysts that agreed to provide Executive with last-minute insights into the backstory of what unfolded in the last days of September are shedding light on some of the factors that contributed to the buildup of economic shocks that people felt toward the end of last month. Whether they take financial/corruption, fiscal/monetary, or regional/geopolitical angles, what these narratives on the reasons for the sudden crisis have notably in common is that their explanations come in tandem with dire warnings that more, worse, and far longer pain is likely to visit upon the people if no true and radical change is accomplished very soon.
Indeed, the September money crunch corroborates what has been repeated ad nauseam this year—and said time and again in publications like Executive—that Lebanon is in need of an economic resuscitation whose dimensions need to incorporate efforts of constructing, restoring, reforming, rebuilding, and reinventing crucial pillars of public trust, governmental credibility, and economic strength.
The budget and public sector need to be put on sane footing and reformed. The energy sector needs to be restored on the side of electricity generation and newly constructed on the side of responsible use of yet uncertain natural oil and gas resources. Expectations on resource exploration and exploitation need to be kept rational and fortified against a dangerous shift from one resource curse (dependence on remittances that yield no investments in productivity) to another (reliance on oil and gas extraction). Infrastructure needs to be responsibly financed and rebuilt under minimization of social cost, environmental destruction, and obsolescence risks. The potential of the digital economy, a functional e-government, and good internet governance including cybersecurity have to be pursued with warp speed.
To zoom in onto the electricity plan as a case study in urgency, the hints on electricity in the International Monetary Fund’s (IMF) latest Article IV statement this summer had zero ambivalence in calling to advance the electricity sector plan without delay. (This was in contrast to the statement’s monetary advice, where some in the political stratum appeared to see ambiguity.)
On the electricity plan, the IMF statement admonished that authorities need to ensure that the plan incorporates a tariff increase that is built on robust and realistic assumptions (instead of wishful thinking and vain number plays, the reader might assume). “It is crucial to start increasing tariffs as soon as possible to generate fiscal savings, possibly targeting the largest consumers first,” the IMF statement emphasized—but when
Executive investigated the rate of progress in the electricity plan’s implementation last month, we could see that despite the government’s evident will for moving ahead, there was a lack of the needed complete clarity on either tariffs or implementation of power plant projects and timelines.
Executive has, over the years, written, analyzed, advocated, and written again about unmet economic needs in Lebanon, to the point of sometimes feeling like a lone voice in the wilderness. A year ago we designed a standalone issue on a possible roadmap for the economy that entailed over 260 proposals from varied stakeholders on areas from revising fiscal policy and reforming state institutions, to ideas for combating poverty and corruption. But frankly, since we have been on the case for longer than we care to admit, our archives are bursting with analysis and advocacy pieces that have accumulated to a pile that leaves us with the sense that solving the Lebanese knot would be a job for demi-gods with Herculean qualifications. The Lebanese government is short on superhuman heroes, even before the problem of the C-word, and the need for a constructive mindset are thrown into the national equation of needs.
However, it is not just the government and the political class that need to be called to order. It is urgent that all people of ethical, intellectual, and financial means stop acting based on what looks right at the moment from a personal interest perspective, which generally results in detrimental and dangerous herd behavior, and start pursuing what is right from the macro-perspectives of long term socioeconomic interest and the assessment of big national data. Put into the context of the make-or-break expectation for the coming two quarters as the most pivotal time for the polity since at least the end of the Lebanese conflict—if not the whole century since declaration of statehood—the situation means in Executive’s perception that the problems of September will: a) not go away if people rage at them, and b) require super-cool heads and even humility if there is to be an avoidance of the pains that threaten the Lebanese people.
The need for clear thinking is further accentuated if one considers that the problems of September 2019 are not transitory, but intertwined with deeply entrenched problems that are known to excess and that have gone unsolved since they emerged in the 1990s when they tested the ingenuity of the most outstanding governmental leader in the last three decades, late Prime Minister Rafik Hariri.
This leads to a third conclusion that the problems that are upon the Lebanese and their government in the remaining few months before a possible final meltdown can only be tackled with a mindset of having transcended all rational fear and narrow self-interest. The situation looks so extreme that in absence of magical superheroes and demi-gods, the coordinates where the government’s problem solving attempts are located are in the realm of the absurd. In a literarily tainted allegory of European archetypes, the space of maneuverability for the state and the citizen alike appears like a stage in an absurd theater where the Lebanese mind needs to find success in an identity quadrant formed somehow by Camus’ Sisyphus, Solzhenitsyn’s Ivan Denisovich, Kafka’s Gregor and Grete Samsa, and Dickens’ Artful Dodger. In this matrix, the rational does not cut it, and it is futile to pursue utilitarian thinking or personal rights that depend on the space of normalcy to have meaning. In other words, it is a moment for individuals to embrace the exponentially absurd, and a time to adhere to behavioral norms that are best suited for improving the state of the whole.
Camus defines Sisyphus as the absurd hero and archetype whose passion for life and hatred of death “won him that unspeakable penalty in which the whole being is exerted toward accomplishing nothing.” In this sense, the need for a Lebanese solution to the emerging crisis of 2019/2020 requires skills of surviving the pressures of a global financial system with the resilience of gulag inmate Ivan Denisovich, the agility for navigating the international political arena with the wits of the Dickensian master pickpocket, plus the determination and character that can retain the inner essence of Lebanese humanity against the most unspeakable changes that one can imagine, such as the protagonists of The Metamorphosis experience in Kafka’s narration.
Finally, by fully embracing the absurdities that are emerging and continuously going to emerge in the Lebanese polity over the coming months, it means for everyone to put their shoulder to the rock of our national insufficiencies and debts and push tirelessly and relentlessly in the direction of hope and solution, without an expectation or guarantee of success. This mental approach could even engender the happiness that comes with attempting to reach the impossible. At least in the perception of Camus, happiness and the absurd are inseparable: “One must imagine Sisyphus happy.”