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Lebanon set to become the world’s next failed state

‘We are heading for the future collapse of everything’ – financial analyst Henri Chaoul.

Lebanon’s economy has shut down. Its population, which includes a large minority of Syrian refugees, is rioting in the streets, and looting diapers and cereal. Its political elites are systematically shutting down negotiations for aid packages with the IMF, unwilling to consider the reforms attached to them. What was once considered a bastion of stability in an unstable region is now prepped to become the world’s latest failed state.

‘Lebanon is no longer on the brink of collapse. The economy of Lebanon has collapsed,’ said Fawaz Gerges, professor of international relations at the London School of Economics, to The Washington Post. ‘The Lebanese model established since the end of the civil war in 1990 has failed. It was a house of glass, and it has shattered beyond any hope of return.’

A brutal combination of economic hardship – not caused by the pandemic but also not helped by it – and old, deep-rooted sectarian conflict has ignited into a deeply troubling situation. The Lebanese pound has lost over 80% of its value since October, and over 60% in the past month. Prices for essential goods are soaring, elevating inflation to 2019 Venezuela levels, with Lebanon likely to follow the South American country further into implosion in the coming months.

Reuters Graphic

The current crisis is the result of decades of economic mismanagement. Like so many Middle Eastern states, long divided along arbitrary lines drawn by the West, Lebanon is more a collection of tribes than a unified nation, leading to a fractious distribution of power. A group of minority elites rule the banks and the military, funnelling wealth into their own pockets and sewing corruption into the flimsy halls of a government whose jurisdiction doesn’t really extend past the capital city of Damascus.

It’s these same elites that have curtailed talks with the International Monetary Fund (IMF), designed to bail out HIPC, or ‘heavily indebted poor countries’. A proposed $10 billion USD loan won’t be issued unless Lebanese politicians agree to a set of socioeconomic reforms that would distribute GDP more evenly. Of course, elites aren’t keen on this arrangement, or the level of international scrutiny it would bring, and are bribing politicians to stall the deal.

This is bad news for the vast majority of Lebanese citizens who are slipping rapidly into poverty. Bread, a staple of the Lebanese diet, is running low as the government cannot fund imports of wheat. Essential medicines aren’t being restocked. Medical procedures can’t be carried out as the national health service cannot provide equipment, and hospitals are laying off staff at an alarming rate.

In a viral Twitter video, a man in a balaclava wielding a pistol is shown robbing a pharmacy for its diapers. Clearly, the situation is dire.

The instability is particularly tragic given that Lebanon was previously a rare jewel of successful statehood in the increasingly tarnished crown of Middle Eastern democracy. It is currently surrounded by states of conflict, near Syria and in the crosshairs of the ongoing nuclear spat between Iran and the US. Its provisional use as a safehouse by the Shia Islamist group Hezbollah, which has been labelled an extremist organisation by many, has brought Lebanon into direct conflict with Israel, which is currently fighting the group in Syria (where Iran and Afghanistan are also heavily embroiled).

The country had been recovering from a 15-year civil war fuelled by the sectarian tensions between various sects of the Islamic and Christian communities, and with the economy collapsing, it’s sure that mass migration will see these conflicts flare up once more.

Of the 6.8 million people living in Lebanon, one fifth are displaced persons, predominantly Syrian refugees, meaning that Lebanon has the highest per capita refugee population in the world. These groups will inevitably be hit hardest by resource scarcity given that they were heavily reliant on the state, which is now crumbling. And now, the Lebanese themselves are at risk of joining the growing crowds of refugees.

Nasser Saidi, a former Lebanese economic minister who is now a financial consultant in Dubai, said here that ‘there could be a massive refugee crisis… It this what Lebanon and the rest of the world want? Do they want another failed state in the Mediterranean?’

It seems that if the international community can’t successfully deliver aid in the next few months, that’s exactly what they’ll get. Lebanon’s former colonial ruler France stands ready to deploy a significant relief fund, but only if Beirut enacts reforms urgently. This looks unlikely to happen, and yet another domino in the Middle East is set to fall into chaos.