Story of Greed and Corruption- Analyzing Lebanon

On the fourth day of August, a warehouse in Beirut, Lebanon exploded. When the fire spread through the building, explosions with far reaching impact were witnessed. The fire detonated about 2,700 metric tons of ammonium nitrate; a highly explosive material that was stored here in the Port of Beirut. The explosion leveled the port and left a zone of destruction 6 miles wide,killing nearly 200 people, and wounding thousands. This article attempts to unravel the mysterious circumstances to ascertain reasons explaining the long stay of such deadly substances at port. Long before the explosion, Lebanon's economy was in a deep crisis. Unemployment and poverty had risen to unprecedented levels andpeople have flooded the streets in protest exclaiming their distress.For many Lebanese, the explosion was the final nail in the coffin. 

In order to understand the political and socio economic conundrum the Middle Eastern countries find itself in, one needs to understand the history and population demographic. Since time immemorial, Lebanon has been home to Christians and Muslims. Both religious groups further tinkle into sects. The largest being, Maronite Christians and Sunni and Shia Muslims. As of the mid-20th century, these three sects shared power, but there was tension between them. In 1975, Maronite and Muslim militias sparked a civil war.

Presently, Lebanon finds itself as a country torn in two by the vicious battle for supremacy between Christians and Muslims. Two dozen ceasefires have been agreed and broken.In 1976, Syria invaded and in 1982 Israel followed, fueling more violence. Fighting was particularly brutal in Beirut, which was divided among the militias. The Muslims control West Beirut and the Christians are entrenched in the Eastern sections. The toll of human life is horrifying. Over the course of 15 years, more than 120,000 people died. Finally, in 1989, representatives of Lebanon's sects came together with other international leaders to end the war. They signed the Taif Agreementwhich divided the government among the sects. In Parliament, each group received a set number of seats and specific positions. The President would be a Maronite, the Prime Minister a Sunni, and the Speaker of the Parliament a Shia. Shortly after signing the Agreement, most of the militias disbandedbut many of their leaders found a place in Government. In this system, political parties were formed along religious lines and each sect claimed different government ministries. Alas, this was not to last long. Instead, the politicians separated their portions of the Government and turned them into fiefdoms.

Using them to enrich themselves and their sects. While using public money for personal gain, the politicians neglected to spend money on the services they were supposed to provide. For instance, garbage collection. A report found that Lebanon was paying about $420 million a year for waste management. Despite that, in 2015, garbage piled up around the country while politicians argued over a new contract. It was the same story across the Government. It spent $1 billion a year on electricity, a sector controlled by the Maronites, but there were blackouts multiple times during any given day. Every household paid a fee for public water, but much of it was undrinkable. By 2015, discontent against government corruption was on the rise. But nothing changed.

Over time, the government racked up dangerous amounts of debt. By 2015, it owed nearly $70 Billion, which, by the way, is in excess of the country’s entire GDP. Rather than employing mechanisms to fix the economy,the Government turned its attention to Lebanon's most important industry- trade via shipping. Lebanon’s businesses pay for imports using American Dollar, which are procured through the banks. Lebanon’s banks famously offer high interest rates, which attract deposits from clients all over the world. Making it the most important sector in Lebanon. Most of the banks are owned by or have ties to the sectarian politicians. And together, they created a schemeto bring more money into the Government. The schemeswere kicked-off with the Central Bank, offering very high interest rates as an incentive to commercial banks. So the banks deposited money there and made a huge profit from this interest.  In turn, the banks hiked their own interest rates even higher to attract deposits from around the world. And then poured that money into the Central Bank.

But this was unsustainable, neither the banks nor the government could cover all this interest. The only thing keeping this scheme together was the banks ability to attract more and more money. And that started to crack in 2011 when Lebanon’s neighbor, Syria, collapsed into civil war. Worried about putting their money so close to the conflict, investors started pulling outof Lebanon's banks. But the scheme did not fully unravel until 2017, when Lebanon’s Prime minister disappeared. Knowing that the will of the Lebanese is stronger and their determination is steadfast.

The Sunni Prime Minister, Saad Harari, resigned via a televised statement from Saudi Arabia. Then reportsclaimed the Saudis forced him to resign and were keeping him there. After ten days the Prime Minister returned to Lebanon and took back his office but the damage was done. This time international investors lost faith in Lebanon and deposits plummeted. Even Lebanese residents rushed to pull their money out of the banks. Without new deposits, government and bank debt skyrocketed. In 2019, the banks ran out of money and froze accounts, limiting what people could withdraw. Leaving Lebanon’s people with a catastrophic problem. To cover its debt, the government announced a new tax, sparking a revolution. Lebanon is in the grip of unprecedented protest. The outrage was sparked by a Government's announcement of a daily taxof 20 cents a day on social media platforms like WhatsApp. The writing, by this hour, was on the wall. The whole system was corrupt and people from all sects flooded the streets in some of the biggest protests Lebanon had seen in decades. It was enough to force Prime Minister Hariri to finallystep down, but the political parties stayed in power. Meanwhile, other countries and international organizations like the International Monetary Fund offered economic aid to Lebanon, if the government could reform itself. But deals could not be negotiated. In one year, Lebanon’s currency lost more than 80% of its value. And unemployment has surged. This was the state of the country when an explosion rocked Beirut.

While at first the explosion appeared to be an accident, it turned out to be the result of this dysfunctional system. According to reports, the ammonium nitrate sat in the port for seven years while government officials bickered over who was responsible for it. Legally speaking, this is a case of criminal negligence. Prime Minister Hassan Diab and several ministry leaders resigned, but the power-sharing agreement remains intact. Many, now, are convinced that the country can not recover until this system is abolished. To make matters worse, there’s been a spike in coronavirus cases since the blast. And now with its only major port destroyed in the explosion, Lebanon is struggling to import what her people need to survive.