October 27, 2017

Triangle’s Director of Knowledge pens an op-ed arguing that the Lebanese should realise that their socioeconomic problems are rooted in elite capture rather than the presence of Syrian refugees.

Our foreign minister, our official representative to the world, demonstrated that racism has now become part of our national identity—Can anyone really blame him?

Populist policies have been continuously aiming at making Syrian refugees illegal residents, imposing illegal curfews on them, closing down their businesses, and releasing fake news reports which note 300,000 Syrian births per year.

Evidently, racism against Syrians is not a first of its own. Lebanon has endured decades of widespread individual and institutional discrimination against migrant domestic workers, which in itself is grounds for labelling our society as racist and xenophobic at its core. Now that the conflict next door is beginning to wane, we see an opportunity to rid ourselves of our most recent ‘interlopers’. But the fact that Lebanese citizens feel entitled to blame their socioeconomic troubles on refugees is tongue-in- check cowardice—a matter that has evidently lead societies to self-sabotage.

First thing’s first, it is not the presence of Syrian refugees that is the root cause of Lebanon’s economic malaise. In efforts to ration their scapegoating attempts, many Lebanese point to a period of economic growth prior to the Syrian refugee crisis. Yet we all know full well that economic growth at that time did little for our personal welfare. Growth in the Lebanese economy has long been funneled to sectors that do not produce job opportunities. In fact, before 2011, the economy produced six times fewer jobs than were needed every year, at just around 3,400 jobs each year. The jobs created were far from being
high-paying and highly-productive even though the Lebanese need exactly that to cope with the rampant prices rises.

It is certainly undeniable that our country’s bizarre rules of economic gravity mean that prices go up, but never come down, even when the costs of production plummet. Beyond brandishing leaders as ‘thieves’ (and willingly voting for them), we fail to fully comprehend how our economy is structured in such a way that ordinary people never reap the benefits of any economic growth. The only real study into who and how sectors are owned in Lebanon was one completed in 2003. At the time, Lebanon was still seriously contemplating entering the World Trade Organization and needed to pass competition legislation to do so—something which never transpired.

This study– which the Ministry of Economy and Trade felt appropriate to publish with a caveat that it did not ‘endorse or validate’ its findings — shows that half the products sold in the Lebanese market comes from sectors where there is an oligopoly in place, or where only a few companies dominate the sector. For instance, the study found that 72 percent of farms in the country were controlled by 6 percent of farmers. The same applies for other products related to food production, like mineral water, pesticides, fuel and so on. It’s no wonder that the ministry tried to wash its hands of the study’s findings. Of course, a lot has changed since 2003, and a lot still hasn’t. Lebanon still imports around 80 percent of its goods, and only one lucky company has the right to import any one product—the exclusive agent. This system is as much a result of opportunistic importers as it is public policy (or lack thereof).

In effect, it means that there can be no competition between a product’s suppliers: The price of any one consumable good is set by one company with no incentive to provide the product at an affordable price.

Anti-trust or pro-competition legislation which prevents firms from colluding to fix prices inside sectors at relatively high levels to maximize their profits, otherwise known as a cartel, are still absent today. An economic system of cartels supported by policies and kickbacks that allow them to expand their power over the market is known as a kleptocracy, clearly defined as the “rule by thieves.” Naturally, any economic growth deepens and accelerates this process in such a system: Prices rise, wages don’t, normal people suffer, and the elite prosper. None of this had or has anything to do with Syrian refugees so far.

The Lebanese may even want to thank the Syrians for coming to their country. Lower consumer and investor confidence in the wake of the refugee influx slowed economic growth, which slowed the perpetuation of the vicious cycle of rising prices and falling wages. Billions of dollars in aid has come to Lebanon. And in fact, for every dollar of aid that has arrived, the Lebanese economy actually grew by 1.6 dollars, largely in cash and to sectors that were withering such as education, transport, and manufacturing.

The proliferation of the aid industry comes with its own problems, particularly the aid dependency which will become glaring once the humanitarians pack up and leave, probably to Syria. But to get an accurate reading of the real effect of the refugee influx on the economy, one would need to assess how refugees have affected the supply and demand of labor and capital. Those studies have been conducted and have not been published, something which is an open secret in the development industry. The reason behind such confidentiality is that these studies findings show that the net effect on jobs Lebanese worked in was next to zero. In other words, the Lebanese have not lost their jobs or livelihoods because Syrian refugees exploited them. What’s not surprising is that these studies have been buried by those same kleptocrats.

Consequently, instead of enacting legislation to correct the structural imbalances in the economy, our ruling class have been busy figuring out how to raise indirect taxes on ordinary people to fund their patronage system, otherwise known as public sector employment. Indirect taxes, such as Value Added Tax, are simple to collect but they impose a heavy burden on poorer people in the country, because everyone pays the same amount of tax no matter how much they make. Thus, the share of a rich person’s tax burden is much lower than that of a poor person. Instead of indirect taxes, the government could impose higher direct taxes on higher-income earners, thus redistributing income and wealth in the economy. Instead, firms are raising prices in anticipation of new taxes. Again: Prices rise, wages don’t, normal people suffer and the elite prosper.

The real reason mainstream Lebanese citizens are suffering is not because of a poor refugee living in a tent, it’s actually a concept called elite capture, or when ‘resources transferred for the benefit of the masses are usurped by a few, usually politically and/or economically powerful groups, at the expense of the less economically and/or politically influential groups.’ By controlling economic and political power, the elites conserve their status and deflect all blame onto the weakest segments of society who have little ability to defend themselves. Sounds familiar? It should: Donald Trump does so with immigrants in the United States, the Burmese Junta does it to the Rohingyar in Myanmar and we (and most notably our foreign minister) do it to Syrian refugees in Lebanon. The real problem with scapegoating is that it allows the status quo to persist.

The result of avoiding the root cause of a problem is inevitably that it festers. If that continues to happen, Lebanon will succumb to more income and wealth inequality that eventually manifests into the kind of social upheaval our region has been going through since the Arab uprisings.

In all honesty, what we Lebanese really fear is really just another explosive class war. Our last civil war was as much about class as it was about anything else. If we are to have another, it will have very little to do with refugees.


First Published in Beirut Today on October 27, 2017

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