Opinion: Beirut blast - Is Lebanon a failed state?
'Countries aren't supposed to be able to go bankrupt - Lebanon has.' Following the devastating explosion in Beirut, the FT's David Gardner examines Lebanon's multiple crises
Produced by Tom Hannen
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If you want almost literally to see a country come unhinged, then all you have to do is watch the video and the photo footage from last week in Beirut, when the Port of Beirut, which is in the heart of the centre of the capital, simply exploded in a vast, vast blast. Allegedly of 2,750 tonnes of ammonium nitrate, which is used for fertiliser, but also for explosives.
If it really were that amount, I suspect we wouldn't be having this conversation. I think it was probably less, but it nevertheless laid waste to a large part of downtown, shoreline, and east central Beirut.
All this in a compounded crisis, which entails the collapse of the Lebanese economy. Because of a debt budget currency and banking crisis. All of which turns into a colossal economic crisis. With an economy shrinking so fast it's almost impossible to measure. It has literally bankrupted the economy.
Countries aren't supposed to be able to go bankrupt. Lebanon has.
Its banking system and its central bank have lent 70 per cent of all their deposits to an insolvent state. They are, therefore, all technically insolvent. The government appointed to try and fix this came up with a recovery plan, saying total losses in the banking system were $83bn and in the central bank, $50bn. That is two and a half times the size of what the economy was last year.
You've got a massive refugee problem. Approximately one in four people in the population of Lebanon is a Syrian or Palestinian refugee. Mainly Syrians - 1.5m Syrian refugees. All that happened before coronavirus and the Covid-19 emergency, which has squeezed any remaining life there was out of the economy.
And then you got this - the absolute epitome of a dysfunctional corrupt state run by people with absolutely zero regard for public welfare, public security, or public goods. All that adds up to a country well on its way to becoming a failed state.
The port can be seen as a microcosm of that failed state. It embodies all the aspects of misgovernment of negligence, criminal negligence, and utter disregard for citizens who, for the most part, are not treated as such, but as supplicant clients by a sectarian system, in which the rights of all these - and they are all minorities - have been usurped by their leaders on a dynastic basis.
Grandfather, son, they're all part of the same syndrome of looting the state. This is, in a sense, a perfectly logical byproduct of that sort of system. Even if you could barely invent what happened here last Tuesday, when you see a mushroom cloud suddenly go up in the middle of the city.
Beirut is not the entirety of Lebanon, by any means. But it dominates the country as a capital, in a way which is atypical of most countries. This is a small country. Large parts of it are still almost pristine. But the way in which Beirut casts a spell over absolutely everything in the rest of the country and the way mismanagement from Beirut prevents the rest of the country from developing in any meaningful way.
For example, at the end of the civil war, 1975-90, almost every militia in the country had its own little makeshift port. Everything went into rebuilding the Port of Beirut at a huge expense. That became the cash cow for these former militia leaders, working their rackets in the port. Smuggling, extracting customs revenue, levying surtaxes on containers, and so on and so forth. It became a very lucrative business.
It's so absorbed the interest, in terms of financial interest, as well, of this political class. That a perfectly good port in Tripoli has been left to languish. In 2018, there was a proposal to build new state-of-the-art grain silos in Tripoli. Because Lebanon imports about 80 per cent of everything it consumes, including 90 per cent, I think it is, of wheat for bread - the staple. Absolutely nothing happened.
And what has happened now is that the national granary - this huge grain silo right at the heart of the port, which was blown to smithereens last Tuesday - it's gone. The entire grain supply is gone. That's a huge problem at a time when there is already hunger in the country. When the middle class is being pushed into poverty, and the poor are being pushed into destitution. And then this.
A great deal of the medical stocks - equipment and pharmaceuticals - went up in that explosion. This is a dire emergency, to which the political class have barely responded.
President Macron of France comes here, tours the city. Is greeted warmly. Not one of these people - one of the proported rulers of Lebanon has dared showed his face.
So what happens next? The situation of this country is now so utterly desperate, there is only one game left in town, in which a new government, it will have to be, with some sort of narrow mandate to rescue Lebanon from disaster. Politics will have to be put to one side. All political squabbles will have to be paused while this government negotiates with the IMF and principal donor countries, led by France, to set real reforms, which the donor community and the fund - as a standby then - are prepared to support, leading to real change.
There have been four rescue funds since the war - aids, soft loans, and so on and so forth. Lebanon has no capacity to borrow. When it was last possible to record these things, its total sovereign debt amounted to 170 per cent of GDP. Proportionately, the third highest in the world. It must be massive there for that now because GDP has shrunk so much.
Nobody is going to lend one lira, one euro, one dollar to a bankrupt Lebanon until it shows real will to reform. That was the message that President Macron of France, who is leading the donor effort, brought to Beirut, just days after the blast. It is actually the only game in town left for Lebanon.