The Lebanon Disaster: A Metaphor for Modern Capitalism

How Rotten is the State of Lebanon?

Even before Covid-19 and the explosion, a third of Lebanese were jobless and half lived below the poverty line. The Lebanese lira (which the Lebanese central bank officially pegged to the dollar in 1993) has lost 80% of its value on the black market since last October1 when protests broke out against the corruption and cronyism of the system. Prices of basic goods have tripled in the year to June.2 Things have spiralled downhill ever since. With inflation at 56% a month the very poor can hardly afford a loaf of bread whilst the petty bourgeoisie and professional sectors are losing their jobs and their homes. As Lebanon imports the vast bulk of its food needs (and six weeks of its grain supply was stored in the silos of the now destroyed port) food prices will reach astronomical levels. The poorest of the population (and especially the 1-2 million Syrian and Palestinian migrants) face starvation.

Perhaps the only real surprise is that last October’s protests did not come sooner. Lebanon is third in the world league table when it comes to debt-to-GDP ratio, but you can get an idea of the rapacity of its ruling class from the fact it is also number 4 on the list of billionaires per capita on the planet. The top 1% of the population takes 25% of the country’s GDP.3

As well as the ruling elite much anger is also directed at the banking system which favours them. Lebanon and banking were once considered synonymous. This was especially true in the 1950s post-war capitalist boom where its generous interest rates and very lax banking regulations made it attractive for anyone holding the increasing amount of Arab petrodollars, as well as inflows of money from the affluent Lebanese diaspora in the West. Once touted as the “Switzerland of the Middle East” its banking sector was seen as one of the few successes in a state beset by both internal civil war and external imperialist interference.

The Lebanese central bank, the Banque du Liban (BDL) even managed to emerge relatively unscathed from the bursting of the global speculative bubble in 2007-8. Its governor since 1997, Riad Salame, gained the reputation as a financial wizard for advising investors to invest in his bank instead of the “dodgy” world financial system. By maintaining the dollar peg and offering ridiculously high interest rates (14%) he continued to enjoy the confidence of Lebanese expats and many other investors. The one thing the Bank did not do, was give loans to Lebanese entrepreneurs to create viable industries, so that Lebanon imports 80% of all it needs. It also meant that tax revenues were low so that one budget deficit followed another. The Bank covered these increasing government deficits by printing Lebanese pounds. The result was that the official rate for the local currency against the dollar became a fiction and a black market in dollars formed. Salame’s “financial engineering” as he called it was just one huge Ponzi scheme. It depended on new deposits to pay the interest on its previous debts and promises.

At the beginning of 2019, when the debt became so large and income did not cover interest payments, the whole thing began to unravel. Salame tried to disguise it but when he issued an order requiring all money transfer offices, such as Western Union and MoneyGram to only pay in Lebanese pounds not dollars, even where transfers were specifically denominated in dollars, the cat was out of the bag. People in Lebanon found it harder to get their money, especially if they wanted the non-inflationary dollars (which were first limited to $300 a day then $50 a day and only if you queued for hours. ATMs were prevented from issuing dollars (and soon became the target of vandalism) and eventually no dollars were obtainable from the banks. The October revolt was started when the Government tried to tax Whatsapp calls4 but behind it all lay a realisation by the population that they had been conned for too long. The Banque du Liban (BDL) had already spent billions in its failed attempt to maintain its official peg to the dollar and eventually could not cover any more of the Government’s budget deficits. On March 9, the Lebanese government defaulted on its foreign debt repayments for the first time in its history.

But the BDL is not the only institutional failure in the state of Lebanon. Pork-barrel politics allowed all the different religious groupings to get their hands on various cash cows of the state. The electricity sector, for example, is run by the Free Patriotic Movement, which is the political party of President Michel Aoun (his son-in-law was made Energy Minister when they first got their hands on it). It is a shambles, with no investment and frequent power cuts.

This is just one example of the gulf between the ruling factions and the bulk of the population which has become even more apparent after the port disaster. The streets are littered with glass over square miles of the capital but the Government has done nothing to help. Every day volunteers (mostly young, the same people who helped the injured on the afternoon of the blast) come down to the area around the old port and with brooms and anything else they can get to clear up the broken glass (even though more keeps tumbling out of the flats above them). The same volunteers go round handing out water and manaeesh (flat breads). In contrast:

"There is no help from the state. Men with guns still guard its infrastructure: the parliament, the central bank, the much-loathed electricity company are all barricaded behind towering blast walls and ribbons of razor wire. Soldiers and police direct traffic. Occasionally they stop for a smoke and watch volunteers work. Aside from a few exhausted civil-defence teams, who lost ten of their colleagues battling the blaze at the port, the Lebanese government has left its people to fend for themselves."5

The insouciance of the state is only matched by the contempt felt for it by the population of all classes. By 8 August the demonstrations had resumed. They were more bitter and targeted than before, and they were clear who the culprits were.

"In the middle of Martyrs’ Square, symbolic gallows were hung to hold those responsible accountable for the port explosion and the rampant corruption in Lebanon. Photos of President Michel Aoun parliament Speaker Nabih Berri, Prime Minister Hassan Diab, former Prime Minister Saad Hariri, Hezbollah Secretary-General Hassan Nasrallah and President of the Progressive Socialist Party Walid Jumblatt, among other political figures, were hung from the ropes."6

Those hanged in effigy were the leaders of the various factions of the kleptocratic elite who have run Lebanon since independence. Their rivalry has exploded into civil war in the past (notably (1975-90) but when it comes to dealing with the population they are united by fear of what may happen next. No surprise then that the violence, as ever, was initiated by these defenders of the old order. The Army were waiting in the square and as soon as the demonstrators arrived they were met with a volley of rubber bullets and tear gas. Despite Beirut’s damaged hospitals being already overwhelmed by the injured from the disaster 238 more were injured and several have lost eyes from rubber bullets fired at close range (but most were treated in makeshift first aid stations). This brutality only inflamed the crowd.

"Several protesters broke into the building of the Ministry of Foreign Affairs in Ashrafieh neighborhood, including officers and military men, and they raised banners on which was written “Beirut, City of Revolution” and “Disarmed Beirut,” and proclaimed the ministry as their headquarters, causing no damage to either the building or property. But the army expelled them by force. The protesters also occupied the buildings of the Ministry of Economy, Ministry of Environment and the Association of Banks in downtown Beirut, as well as the Ministry of Energy in Corniche el-Nahr neighborhood."7

The same report stated that 20 were arrested that day. The Prime Minister, Hassan Diab (installed mainly at the behest of Hezbollah after the resignation of Saad al-Hariri during the 2019 protests) not only resigned but so did a swathe of MPs and several ministers. All are jockeying for position to try to emerge on top from this current wave of unrest. Diab, having resigned said he would stay on for two months as caretaker until fresh elections, admitting what the whole world already knew that

"The country is experiencing the aftermath of a huge disaster that has left a devastating impact. The port of Beirut disaster resulted from deep-seated corruption and years long mismanagement."8

The Lebanese ruling elite is essentially the same as any ruling capitalist class anywhere else in terms of operating the state to line their own pockets. Each of the main religious groupings is basically a state within the state, and the leading families in each basically control their fiefdoms through a system of clientelist patronage. This is the charter for corruption which every warlord and politician operates to buy the loyalty of their followers. When the first wave of protests began last October, Maha Yahya, director of the Carnegie Middle East Center in Beirut told the Financial Times,

"You have basically sectarian [or] militia warlords who have been subdividing the economy among them to some extent,” she said. Studies have found that politically connected firms in Lebanon do much better than those with no such connections, Ms Yahya added. “As for accessing jobs in the public sector, if you do not do that through the political leader of your sect, your chances are close to nil, and it doesn’t matter if it is a low-level job."9

The Imperialist Vultures Continue to Circle the Failed State

What distinguishes them is the strange constitutional framework which has allowed them to take it to such lengths. There are two main factors in the issue. One is the fact that Lebanon has long been an area of interest for various imperialist powers as a gateway to the oil riches of the Levant10 and wider Middle East. Like many other post-colonial states its boundaries were fixed by imperialist rivalries in the Treaty of Sevres (which handed the territory to France as a “mandate of the League of Nations”). During the Second World France, under German occupation, was forced by the British (whose military were on the ground) to grant Lebanon “independence” and it came into existence in 1943.

The system that was set up was based on a power sharing arrangement started by the French even before they formally took over the territory in 1919 (which was extended way beyond the old Ottoman mutasarifiya (governorship) of Mount Lebanon.11 When the Lebanese state came into being in 1943 its territory consisted of 18 different recognised religious sects. Power sharing between the major religions was based on an informal national accord. This provided for the President to be a Christian, the Prime Minister a Sunni Muslim, and the Speaker of the Parliament a Shia Muslim whilst the Chief of the General Staff was reserved for a Druze (although in practice this last condition was quickly eroded).12 The other 14 recognised religious minorities in Lebanon were not formally represented. It seemed a feasible arrangement, and in the capitalist post-war boom, Lebanon seemed a bastion of progress in Middle East.

In practice the Lebanese national accord was always an uneasy one and was often undermined by events which were going on in the region around Lebanon. The first of these was the rise of pan-Arab nationalism especially in Nasser’s Egypt. When Egypt and Lebanon’s neighbour Syria joined in the United Arab Republic in 1957 the Arab Muslims and the Druze wanted Lebanon to join it. This was opposed by the Maronite Christians so the first Lebanese civil war broke out. It was a war which brought US marines on to Lebanon’s beaches as they intervened on behalf of their Christian allies.

However this turned out to be a minor episode compared with the civil war which lasted from 1975 to 1990. This time the outside issue was the Palestine/Israel conflict. The creation of the State of Israel led to a war against the Arab states in 1948. Lebanon did not take part militarily but did receive 100,000 Palestinian refugees. Another 300,000 were taken in when the Palestinian Liberation Organisation was expelled from Jordan after the fighting of “Black September” in 1971. This eventually made Lebanon a battleground between Israel and its Christian militia supporters and the PLO who got some support from the Muslim groups in the country. Lebanon has been invaded at various times by Israel, Syria, the USA and France. The various imperialist powers only acted to aid of one or other of the local “confessional groupings” thus deepening the conflict. By the time the long civil war was over in 1990, 120,000 Lebanese had been killed but imperialist intervention did not end there. With the withdrawal of the USA and its allies (who were replaced as “peacekeepers” by the United Nations Unifil forces) Syria became the dominant force in the country until 2005 when the “Cedar Revolution” forced its withdrawal. The main gainer was Iran with the rise of Hezbollah.

Hezbollah (“the party of God”) was formed by Iranian-educated mullahs in the early 80s. It is now the main political and military organisation of Shia Muslims in Lebanon (taking over from their ally Amal in the 1990s). It began as an organisation specialising in suicide bombings. The most dramatic of these was the 1983 bombing of the Beirut base of the US Multinational Force (which also included French, Italian and British troops). This killed 241 US and 58 French servicemen leading to the withdrawal of the force. Hezbollah received hundreds of thousands of dollars in military aid from Syria and Iran and in 2006 fought Israel in the “July War”. Although its casualties were ten times that of the Israeli Defence Forces the outcome was enough of a stalemate for it to claim a propaganda victory. This increased its support amongst not only Shia Muslims but other sectors of the population in Lebanon. Ultimately this gave it about one third of the seats in the Cabinet which meant that nothing can be agreed without its say so.

Today this dominance is coming back to bite them. They are not only held responsible by many for the million and half Syrian refugees which have fled the war there, but also for defending the corruption of the system. Hezbollah, along with their Christian ally, the President General Michel Aoun, have thus been the most emphatically opposed to any change in Lebanon’s political structure or for any new elections. When the protestors took to the streets last October it was Hezbollah supporters who eventually attacked them. As the leaders of the Maronite Christians and Sunni Muslims are now trying to win popular support by resigning from their parliamentary and governmental seats there is a fear that a new civil war is in the offing. If it does happen it will be yet another imperialist proxy war of the type that has characterised modern capitalism since 1945 and to which Lebanon is no stranger.

It’s game on already. Iran and Russia have already sent field hospitals to replace those damaged in the blast and the Iranian Foreign Minister Javad Zarif, on a visit to Lebanon, contrasted this with the warships France and Britain have deployed for supposedly humanitarian purposes only.

President Macron of France though got to Lebanon before Zarif. He made it clear that whilst immediate humanitarian aid is on offer, the kind of bailout that Lebanon really needs will only come “with reforms”. Macron, who would be jeered if he tried to walk amongst crowds in France, was greeted like a hero by many. An online petition calling for France to re-establish its control over the country had 66,000 signatures within a few hours. What “reforms” he has is in mind are first of all the disarmament of the Hezbollah militia and the break-up of the Hezbollahh-Aoun alliance which basically governs the current status quo in Lebanon. This would be music to the ears of the US and Israel since it would weaken the imperialist reach of Iran. France though has its own reasons for wanting US and Israel support here. Despite the fact that the whole of the Middle East and Central Asia have been ablaze with conflict for decades there is now another game being played in the Mediterranean and in Libya.13 France has lined up with Greece and Cyprus against Turkey in the struggle for control of the as yet untapped gas fields of the Eastern Mediterranean. This anti-Turkish policy could explain why France has also invited Iran to any discussions on the future of Lebanon. The fate of Lebanon (like any other state where imperialist forces are in play) will not be decided in Beirut alone.

It is also too early to say clearly what the consequences of the continuing social and economic meltdown in Lebanon will have. The fact that it is one more devastating example of where the world capitalist crisis is taking humanity cannot be denied. The more desperate the economic situation becomes the more violent the solutions which the world imperialist order invokes. Western commentators are glib in their assumption that the “revolution” in Lebanon will see a reduction of the power of Iran’s proxy Hezbollah which currently has the most influence inside the country but Hezbollah is not just a powerful militia – it has an extended social network which guarantees a modicum of security for its Shia followers. It is in better shape to hold its constituency together than most of the other factions.

But what of the protest movement itself? The one factor which we have not mentioned is that of class, and for good reason. Last October’s movement was said to unite all Lebanese against all the factions. Dressed in the flag of the nation these predominantly petty bourgeois and professional people posed the question but after all that has happened they can only ask. They have no answer. Many workers are still taking part in the demonstrations against the regime but, driven by hunger and want, only as individuals. There is as yet no organisation which gives them a collective political voice.

Lebanon needs more than a change in its rules of governance. If “revolution” (a slogan seen more and more) is to mean anything it has to be an international one, and it has to be about creating a new mode of production which destroys the power of the old order. The fact that the Lebanese working class is trapped by these confessional mini-nationalisms means it is objectively even more difficult for it to create its own independent political force and to pose a real alternative. It will be even harder if humanitarian aid is distributed via the existing clientelist system as seems to be happening already. Lebanon is a perfect metaphor for the failing Ponzi scheme that is modern global capitalism. That capitalism cannot be destroyed in one country alone. Only a mass movement of the world’s workers can open the door to the relief of the working class everywhere and not just in Lebanon. Given the rate of development of the capitalist crisis this could arrive sooner than seems possible now...

Jock
18 August 2020

• 1Lina Mounzer in The Economist https://www.economist.com/1843/2020/08/11/lebanon-a-country-in-free-fall
• 2Chloe Cornish “Hunger threat adds to burden of soaring food costs in Lebanon” Financial Times 10 August 2020
• 3https://www.forbes.com/sites/tatianakoffman/2020/07/09/lebanons-currency-crisis-paves-the-way-to-a-new-future/
• 4See https://www.leftcom.org/en/articles/2019-10-30/global-protests-the-relentless-capitalist-crisis-demands-the-overthrow-of-the
• 5Greg Calstrom in The Economist https://www.economist.com/1843/2020/08/11/lebanon-a-country-in-free-fall
• 6Hanan Hamdan in https://www.al-monitor.com/pulse/originals/2020/08/lebanon-protests-explosion-blast-ammonium-beirut-port.html
• 7Hanan Hamdan loc cit
• 8Quoted in https://www.al-monitor.com/pulse/originals/2020/08/lebanon-protests-explosion-blast-ammonium-beirut-port.html
• 9Financial Times 20 October 2019
• 10The Levant is the old name Europeans gave to the area of the Ottoman Empire which stretched from present-day Syria through Lebanon and Palestine to Jordan and Iraq. We continue to use the designation of “Middle East” despite its imperialist origins (and illogicality – at least French imperialism’s designation of it as “Near East” has some logic in geography.
• 11The name “Lebanon” is derived from a Phoenician word meaning “milky white” which some think is due to its snow-capped peaks for half the year but as Mount Lebanon is mainly composed of limestone it may even refer to that.
• 12The broad outlines of this agreement were reiterated in the Taif Accord which brought the long civil war from 1975-90 to an end.
• 13The arc of imperialist war and devastation now stretches from Libya across the Mediterranean where France, Egypt, Israel, Cyprus and Greece are facing off against Erdogan’s Turkey over the exploitation of offshore gas fields, through Syria, Iraq and Iran to the borders of India with Pakistan and China. This does not even take in the simmering conflict between Azerbaijan and Armenia or the ongoing war and humanitarian disaster in Yemen. A similar Eastern Mediterranean confrontation between Turkey and Qatar versus Egypt, France, Russia and the UAE can also be seen in the “civil war” in Libya.