The Lebanese emotional economy: a country’s saving grace amid chaos
Photo: Reuters
Political analysts are often asked how Lebanon is surviving with new businesses and thriving sectors amid an economic meltdown and a political vacuum. Referred to in conversations as a schizophrenic country by many, Lebanon finds spotlights of economic outbursts in a volatile and temporary survival approach through informal channels and emotional attachments. The economy is staying afloat not because of an educated plan to revamp monetary policies and encourage governmental stability, but because Lebanese expats can’t seem to get enough of believing in their homeland. Lebanon has been without a sitting president since October 2022, a transitional government that is un-operational for the most part, with no end in sight to a series of multi-crises that keep plaguing the nation. A World Bank report described Lebanon as a sinking ship accusing the country’s leadership of inadequate responses to the challenges it is facing. It classified Lebanon’s crisis as one of the worst in modern history. It conditionally approved financial assistance of $3 billion upon the implementation of structural and financial reforms. These reforms have been impossible to plan, let alone implement in a political environment that seems to hinder reforms and thrives on personal interests. The catastrophic situation that such a geographically small country has been facing is further exacerbated by regional events that keep adding pressure to an already combustible situation, the last of which is the Israel-Hamas war.
Talks of a spill-over into Lebanon through its southern borders and a repeat of the disproportionate and devastating 2006 Israel war would push its economy into yet another abyss and severely obliterate the country’s fragile infrastructure. Lebanese lost around 80% of the value of their savings and have to resort to creative approaches to get access to whatever is left – when and if possible. Institutions, businesses, and citizens are desperate for fresh dollars transferred from abroad to keep the import-reliant country going, have access to basic necessities, and be able to afford a decent living standard. Lebanon’s annual inflation rate was 208.5% in September 2023. The country has been grappling with hyperinflation for over three years, amid stalled economic reforms and a political vacuum. Unemployment was around 30% in 2022. According to the same World Bank report, “Nominal GDP plummeted from close to US$52 billion in 2019 to an estimated US$23.1 billion in 2021. The protracted economic contraction has led to a marked decline in disposable income. GDP per capita dropped by 36.5% between 2019 and 2021, and Lebanon was reclassified by the World Bank as a lower-middle-income country, down from upper-middle-income status in July 2022. Such a brutal contraction is usually associated with conflicts or wars.” The irony is that Lebanon was neither in a time of war nor acting as a proxy for regional conflicts. This apocalyptic collapse was truly “made in Lebanon” by the political elite who reigned supreme for decades on end. Today’s status quo is not the result of one man, it is in direct connection to a political class that has entrenched itself into the country’s system replacing good governance with a web of corruption, clientelism, nepotism, and a crippling patronage structure preventing any type of reforms and enshrining more personal powers. Looking from afar, many businesses were forced to close their doors, but many opened new establishments, sectors, markets, and even spearheaded trendy Lebanese destinations and revived traditional industries. Answering how Lebanon’s economy is surviving today does not rest on an economic theoretical understanding. The fact that Lebanon as a country is not relying on a specific agenda and reform mechanism promotes the presence of an informal economy. The latter relies on two main pillars: a survival economy and remittances, both of which are unsustainable and temporary at best. Today, the country’s financial system revolves around a survival economy. There is no method or well-versed plan of action to fully reinstate the country from bankruptcy into a more stable cycle. The way the economy is behaving today rests on a direct response mechanism that is led by a shadow economy. The system adapts itself to the ongoing fluctuations and lack of liquidity finding timely and temporary ways to deal with a situation. Everyday challenges become new obstacles to face leading to creative answers to counter the instability. What starts as shocking and unacceptable is normalized, until the next new shockwave. However, this path is far from providing stability and security. Ideally, at this time, after billions of dollars in losses and a severely handicapped nation, there would be a viable plan of action to meet the International Monetary Fund requirements, privatize some sectors, liberate others, and ease the markets to allow the economic activity to take its course. The informal economy and remittances particularly, are built on a non-economic system that is heavily reliant on traits that are peculiar to the Lebanese culture. Lebanese, in general terms, have a strong sense of belonging to the motherland, and always find ways and reasons to return, invest, or visit. The Lebanese diaspora harbors a strong feeling of belonging – Lebanon’s remittances amounted to $6.4 billion in 2022, “positioning the country 3rd in the MENA region in terms of the absolute size of remittance inflows.” It is crucial to note that the Lebanese government estimates the Lebanese diaspora to be 15.4 million, almost three times as much as the country’s population today. Most Lebanese expats return home whenever they get the chance to help, party, sustain, and promote local businesses. This attachment to the homeland, a cultural and emotional trait, although a romantic notion to most, is playing a leading role in financing and feeding this informal economy. Lebanon’s Ministry of Tourism accounts for positive outbursts in the economy that revolve around Lebanese expats returning home and spending money: seasonal economic booms that are based on Christmas, Easter, and Summer. Even airlines started to account for this influx of travelers by providing new schedules and routes to accommodate the high number. In 2023 alone, there was a 30.6% increase in the number of restaurants, cafes, and bars. Family houses are transformed into state-of-the-art guesthouses accommodating travelers and encouraging local tourism and the discovery of new areas that have been long forgotten. Each area in Lebanon has its own character and history. Countless villages are nestled in the hearts of mountains and valleys surrounded by unique sceneries and breathtaking layouts; state-of-the-art premises branding wineries, food, and entertainment as Lebanon’s ultimate services. The inclination is now to introduce these villages, capitalize on the intricacies of Lebanon’s lands, and thrive on the amalgamation between contemporary and traditional, the unique collision between artisanal and modern traits, and the country’s capacity to catapult you into the most epic nightlife while being in the most iconic historical settings. Wanting to showcase Lebanon under this limelight and believing that the country has far more to offer than the political schism that is being marketed on the news, makes the Lebanese diaspora visit time and time again, acting as the ultimate influencer and brand ambassador to the “made in Lebanon” tag. The sad reality is that such an emotional trigger is being used by politicians to delay the implementation of political and financial reforms that would see the balance of power within the country redrawn. It will most probably introduce new names and voices at the expense of the traditional elite while initiating laws that would curb corruption. The pace at which discussions are being held is a clear sign that politicians are not ready to renounce their seats just yet, delaying the inevitable and causing further irreparable damage.
By Marita Kassis
