Debating Hariri’s economic policy

And the question of Lebanese corruptive and monopoly practices

We’ve started a debate around political economy issues in a previous post. So please stop commenting in the previous post and start commenting here. I just copy-pasted the last entries in the comment section. I will be soon answering and I encourage everyone to contribute by commenting here.

As a summary:

We are assessing of the economic ‘policies’ or broad rationale followed by the various Hariri cabinets since the inception of his first term. through an assessment of:

1- Interest rate politics followed
2- Reconstruction of downtown and some infrastructure
3- General economic (or business) visions
4- Other economic and social practices

Hussein proposes what I would call the “security threat” argument, where Hariri had to hike interest rates because investment climate was bad supposedly due to the war in the south.
I will soon show that this argument is untenable.
Another argument dear to the Harirists are the “service economy” argument. Although Hussein says he is against I want to show how this argument is at the core of Hariri’s policies and political interests and ultimately (and among other things) serves to keep the confessional system well entrenched, and the constituencies pretty much dormant (in terms of social assertiveness) and divided.

Always a winner

No matter what happens, there is always one clear winner in Lebanon:

In its study titled “International Expansions Not Priced In,” Cairo-based EFG-Hermes stressed the buoyancy of Lebanese banks. The report, which was published in Banque Audi Saradar’s weekly bulletin on Monday, noted that customer deposits witnessed year-on-year growth of 4 percent in 2005 and 6 percent in 2006, while deposit outflows were short-lived and limited.

Funny, this was already the conclusion of economist Georges Corm in a latest interview. The Central Bank is still sinking in its FOREIGN exchange liquidity, and so there is no loss of confidence. But you know what is the price to pay for this liquidity? More debt: the accumulation of this foreign liquidity was done by substituting local currency debt to foreign. In sum, this raises the value of the debt. Who wins? The banks.

Oh and by the way, there is also the idea that ‘consumers’ put their money in banks because they are not spending. You mostly save because you are reluctant to spend. Not spending partly reduces economic activity. Then, Banks take this money and do not create economic activity with it either because they either buy debt from the State or put the money outside of the country. Nevermind.

Meanwhile, the banks create their own confidence. The nexus, banks-Central Bank-Ministry of Finance (Bks-CB-MoF) make sure ‘everybody’ is happy. See, the whole concept of “confidence” is a tricky issue in economics. But I don’t want to open the discussion here. Suffice it to say that it is a very dark world filled with IMF and other international institutions bureaucrats and political assurances here and there that “it’ll be fine, put your money folks and we’ll make sure it will multiply”.

I like how this flies against any hard-economic rationale. Normally the rule is simple. If there is political instability then you get your money out quick. but if ‘everybody’ (mm say, Hariri and co for example, seconded by Saudi investor’s assurance).

I say simply that those who ‘put money’ in the Lebanese economy, of course I mean those who really do make a change, have political guarantees and are part of the same network. It seems that with regards to the banking sector (and I stress only the banking sector), there is a solid system in place. A system that involves few actors but a lot of money, unconcerned by the rest of the Lebanese economy. Because at the end of the day, it is not the Lebanese economy per se that is at the heart of concerns, but some kind of fictive ‘confidence-based’ economy created by a bleeding public financial system being eaten away by lazy local banks who if they don’t put their money in fatly remunerated TBills go invest outside of Lebanon. Why would a war then destabilize this system?

The politics of naming

One of the first political phenomenon I am concerned with is the time (and resources etc.) dominant actors spend on finding suitable categories to define (or give meaning to) their various political actions. In addition to the fact that naming gives significance or the illusion of substance in perceiving the enemy, the symbolic act of naming Hizbullah a “terrorist” organization opens the door for so many different legal as well as diplomatic dispositions that has concrete material effect (in the same way the beefing up of an army has material significance):

United States lawmakers are stepping up pressure on the European Union to declare the Lebanese militant group Hezbollah a terrorist organization.

A House of Representatives’ panel is to highlight Wednesday the importance of Europe as a fundraising base for the group, long held responsible by the United States for anti-U.S. and anti-Israel attacks.

Some European countries have resisted an EU designation of Hezbollah as a terrorist organization, arguing that it is better to engage the group given its large role in Lebanese politics.

What is important here is to notice how, generally, legal appellations and social norms are all based on this categorization principle. In this case, the creation of significance is a political process embedded in institutions in place (governments, parliaments, courts, etc.) that serves to create disciplined subjects and the ‘other’.

The new Frenchman in the East

Well, it turns out that there may well be interesting developments in French politics with the arrival of Nicholas Sarkozy as president. The French envoy Jean-Claude Cousseran who was roaming around the backdoors of Syrian government buidings around the time Mustaqbal deputy Walid Eido was killed, turns out to have a history of confrontation with French ex-president and Hariri long time friend Jacques Chirac. In this article dated from June 2002, Cousseran is said to have been fired by Chirac because he was trying to find proof of corruptive practices done by the latter. More than that, Cousseran was the head of the main French espionage agency, the Direction Generale de La Securité Exterieure (DGSE).

So please can somebody tell me why when this type of guy goes to Syria to investigate possibilities of change in French-Syrian political relations does a newly found Lebanese “anti-Syrian” politician get killed?

The Saga Continues …

Confrontations between Hamas and Fatah members erupted in at least two Palestinian refugee camps in Lebanon over the weekend, raising fears that the situation in the Palestinian Territories might spill over into Lebanon’s camps.

The Salafi Connection

“There’s a relationship between ourselves and Sheik Saad when it’s needed,” Shahal said. “The biggest Sunni political power is Hariri. The biggest Sunni religious power are the Salafis. So it’s natural.”