A year ago a devastating explosion of a stock of ammonium nitrate fertiliser haphazardly stored at Beirut's port killed more than 200 and left much of it looking like a war zone. The blast, for which no-one has been held accountable, and the effects of the Covid-19 pandemic, dealt terrible coups de grace to an economy already sinking into what the World Bank describes as the third most severe economic crisis globally since the mid-19th century.
Lebanon’s per capita GDP has plummeted by 40 per cent, pushing nearly half the population below the poverty line and into unemployment. The currency’s collapse by as much as 90 per cent has also seen salary values crash and eaten up life savings. Little wonder thousands have taken to the streets in what is fast becoming a failed and ungovernable state. On Wednesday dozens were injured when police clashed with protesters demanding accountability for the explosion.
At the root of the crisis is the collapsing, once admired, banking system. Together with the Banque du Liban, Lebanon's central bank, commercial banks engaged in what was in effect a national Ponzi scheme that dug an $80 billion public debt hole in the country's finances. Eight families control 29 per cent of the banking sector's assets, led by the family of former prime minister Saad Hariri.
The appointment on Monday after a nine-month political deadlock of billionaire businessman and ex-premier Najib Mikati as Lebanon's new prime minister-designate is hardly reassuring. Despite pressure from international financial institutions, the EU and US for far-reaching reform and restructuring, Mikati is very much part of what the World Bank calls "elite capture" and "the political consensus in defence of a bankrupt economic system, which benefited a few for so long". It has characterised the crisis as a " deliberate depression", fed by that elite.
That “elite capture” has been enabled by a political system based on enforced power sharing that instead of easing communal tensions, exacerbates and entrenches them.