Currency chaos in lebanon: failed neoliberalism

After the civil war, the government and banks relied on the income of the diaspora. The bankruptcy is the result of high interest rates and expensive government bonds.

This young man would rather work than smoke shisha. Many Lebanese are without jobs Photo: Bilal Hussein/ap

The financial crisis in Lebanon shows that the neoliberal economic model is doomed to failure. The country is experiencing the worst economic crisis in its young history. The Lebanese pound has already lost no less than 80 percent of its value. Hunger is the most urgent problem. Supermarket shelves are filled, but people can no longer afford bread and rice.

Even subsidized foodstuffs are now more than twice as expensive as before the crisis, while the number of unemployed keeps growing. Immediate aid is needed, and longer-term investment in the productive sector is needed to break dependence on expensive imports and guarantee food security. In the post-civil war period, banks and politicians created a privatized country where most of the money was made in financial investments or real estate. Jobs were not created as a result.

Now it is mainly young unemployed people who break windows, throw Molotov cocktails at bank branches and attack each other with batons. The system is designed to make young people leave the country. In financially strong countries like France or Germany, the diaspora earned in foreign currencies that they invested in Lebanon. Private banks lured the exillibanese with double-digit interest rates. This helped stabilize the local currency.

The banks invested the money in high-interest bonds to the government, which led to high public debt. Lebanon is heading toward hyperinflation. The government is negotiating with the International Monetary Fund. Many Lebanese believe that only international pressure can force reforms. But the IMF does not stand for social reforms, but for budget cuts and higher taxes.

Lebanon needs a social system. Peace will only come when the state serves the people. Not the other way around.

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