Lebanon’s “Great Denial” Must Be Reversed, but Time Is Running Out

COMMENTARY Middle East

Lebanon’s “Great Denial” Must Be Reversed, but Time Is Running Out

Feb 7th, 2022 3 min read
COMMENTARY BY
Anthony B. Kim

Research Fellow and Editor of the Index of Economic Freedom

Anthony B. Kim researches international economic issues at The Heritage Foundation, with a focus on economic freedom and free trade.
Anti-government protester throws a flare towards Lebanon's central Bank in Beirut, Lebanon on January 23, 2022 as the country's economic situation worsens. Marwan Naamani / picture alliance / Getty Images

Key Takeaways

“Lebanon’s deliberate depression is orchestrated by the country’s elite that has long captured the state and lived off its economic rents.”

An unstable political climate in Lebanon will likely allow Hezbollah, an Iranian-backed terrorist group, to gain even more influence in the region.

Lebanon runs a grave risk of falling into another civil war and potentially decades of turmoil that would severely imperil U.S. interests.

“Lebanon’s deliberate depression is orchestrated by the country’s elite that has long captured the state and lived off its economic rents.”

Very unfortunately, but precisely, that sentence in a recent World Bank report summed up the root cause of Lebanon’s tragic economic downfall.

The Lebanese people have been suffering as the direct consequence of government mismanagement and systemic corruption in which small private interests have long influenced the state’s decision-making processes for their own advantage.

Lebanon’s worsening economic hardships have been foreshadowed by heightened levels of government debt, the lack of efficiency in many parts of the economy, and widespread corruption that has severely undermined the rule of law and trust in government.

Monetary stability is long gone, with inflation skyrocketing over 80% in recent years and the most basic public services such as electricity, drinking water, and waste disposal collapsing. The World Bank reported last year that Lebanon would experience one of the worst financial crises the world has seen since the mid-1800s, and now we are seeing that prediction come to fruition.

This is today’s tragic reality of Lebanon, the once thriving Mediterranean economy, with its ongoing economic and political calamities that have gone from bad to worse.

According to the World Bank report titled “The Great Denial,” Lebanon’s severe socioeconomic malaise is borne out of—and prolonged by—the country’s corrupt elite that have continued to manipulate and take advantage of the system for their benefit at the expense of others, despite the severity of crises the country has been facing.

Lebanon’s long-term stability and social peace is threatened. As the bank report points out, “deliberate denial during deliberate depression is creating long-lasting scars on the economy and society. Over two years into the financial crisis, Lebanon has yet to identify, least of all embark upon, a credible path toward economic and financial recovery,”

Lebanon’s current situation is also problematic for the United States’ regional security interests, given the fact that an unstable political climate in Lebanon will likely allow Hezbollah, an Iranian-backed terrorist group, to gain even more influence in the region. Hezbollah and its political allies already hold over half of the Parliament’s seats in Lebanon.

The Heritage Foundation’s annual Index of Economic Freedom has long noted the significant institutional problems affecting the Lebanese economy.

The 2021 index rated Lebanon’s economy as “mostly unfree” for the ninth year in a row. It highlighted how feeble political institutions within the country were undermining the rule of law and severely limiting the ability of individuals to care for themselves and their families.

The fact that many of Lebanon’s problems seem to be structural indicates a quick recovery is highly unlikely. While many Americans are unaware of the chaos in Lebanon, the Lebanese people are experiencing the dire consequences that occur when a country collapses, the rule of law is ignored, and freedoms are severely restricted.

Lebanon must strengthen its political institutions so that some semblance of the rule of law can be upheld. Yet Lebanon’s already feeble political institutions have been further weakened since early this year. They have been unable to address the deep structural issues, such as political corruption and a complete lack of government transparency, that have severely compromised the rule of law and have blocked improvements in fiscal management. Without fundamental reforms, economic freedom in Lebanon cannot move forward.

Washington should pay elevated attention to Lebanon. As a recent Heritage commentary pointed out, if not altered, the current course of Lebanon runs a real, grave risk of falling into another civil war and potentially decades of turmoil that would severely imperil both U.S. interests and those of America’s allies in the region.

This piece originally appeared in The Daily Signal