How spend­ing could ease suf­fer­ing

Executive Magazine - - Contents -

We are not talk­ing about a pa­tron saint or the res­ur­rec­tion of a su­per­hero, but about the ideas of the late John May­nard Keynes (1883-1946).

Key­ne­sian eco­nom­ics are based on the tenets that in­creased gov­ern­ment ex­pen­di­tures and low­er­ing of taxes can act as stim­u­lus for economies in re­ces­sion. The Key­ne­sian model con­tends that a mul­ti­plier ef­fect can oc­cur as a re­sult of in­ject­ing money into the econ­omy, caus­ing a larger in­crease in na­tional in­come through higher con­sumer spend­ing, which in turn leads to in­crease in in­come and even­tu­ally more con­sump­tion.

Le­banon’s econ­omy is in dire need of such stim­u­lus in or­der to mit­i­gate the ef­fect of the Syr­ian cri­sis and cre­ate jobs for more than 300,000 in­di­vid­u­als — both Syr­ian refugees and mem­bers of Le­banese host com­mu­ni­ties.

Since the on­set of the cri­sis in Syria, Le­banon has been host to 1.01 mil­lion UNHCR-reg­is­tered Syr­ian refugees (or 1.5 mil­lion in to­tal ac­cord­ing to the Le­banese gov­ern­ment’s es­ti­mates). With a quar­ter of the pop­u­la­tion cur­rently refugees, Le­banon has the high­est amount of refugees per capita in the world liv­ing with­out pro­tec­tion un­der any for­mal asy­lum regime that would en­sure their rights. Fur­ther, the vast ma­jor­ity of the Syr­ian refugees (87 percent) re­side in the poor­est ar­eas of the coun­try, where 67 percent of the most vul­ner­a­ble Le­banese live.

This has cre­ated a dou­ble bur­den on the mea­ger re­sources that ex­ist in these chron­i­cally ne­glected and un­der­served re­gions, such as the Bekaa, Akkar and the suburbs of Beirut and Tripoli.

The cri­sis in Syria and the re­gion, as well the po­lit­i­cal stale­mate up un­til the elec­tion of Pres­i­dent Aoun in Oc­to­ber 2016, have had sig­nif­i­cant neg­a­tive ef­fects on Le­banon’s econ­omy. The clo­sure of freight land routes as re­sult of the war in Syria has ei­ther stopped ex­ports al­to­gether, or made ex­ports to Gulf coun­tries very ex­pen­sive. For­eign tourists have shied over the past six years (though there has been a re­cent uptick, see ar­ti­cle page XXX), and For­eign Di­rect In­vest­ment (FDI) has dropped al­most by half since 2010. Con­se­quently, GDP growth has fallen sharply, from 8-10 percent prior to the cri­sis, to an es­ti­mated rate of around 1-2 percent, per the IMF.

Fig­ures on un­em­ploy­ment are more com­plex than they read at face value. Whereas some sec­tors have seen an in­crease in jobs cre­ated fol­low­ing the cri­sis, such as NGOs, youth un­em­ploy­ment has been on the rise. In refugee host­ing re­gions like Akkar and the Bekaa, youth un­em­ploy­ment has spiked dra­mat­i­cally. Partly due to the large num­bers of new Syr­ian en­trants to the work­force and in­creased com­pe­ti­tion for al­ready scarce jobs, but also due to the lack of job op­por­tu­ni­ties in these re­gions. Prior to the cri­sis, Akkar had the low­est se­condary school en­roll­ment rates among Le­banese districts, and with lim­ited eco­nomic op­por­tu­ni­ties, un­skilled youth looked to the army as their way out -- 19 percent of house­holds in Akkar rely on mem­bers en­rolled in Le­banese armed forces as their source of in­come. The is­sue of un­em­ploy­ment gets more com­pli­cated with 84 percent of Syr­ian youth in Le­banon (those aged be­tween 15-17) leav­ing school to look for a job in the in­for­mal sec­tor, of­ten as un­skilled la­bor­ers.

Bring­ing in Key­ne­sian ideas is a strate­gic re­sponse to such a cri­sis — es­pe­cially as this looks in­creas­ingly like a pro­tracted prob­lem with no durable so­lu­tion in the hori­zon. The premise is that in­ject­ing money into the Le­banese econ­omy through largescale in­vest­ments in phys­i­cal and so­cial in­fra­struc­ture would stim­u­late con­sump­tion and in­crease in­come lev­els. This would pri­mar­ily be aimed at cre­at­ing jobs for Le­banese as well as for Syr­ian refugees. And we are talk­ing here about Mar­shall Planstyle in­vest­ments at $4-5 bil­lion a year. At a rough es­ti­mate, such mas­sive in­vest­ments would di­rectly cre­ate around 100,000 jobs; in ad­di­tion to their sig­nif­i­cant mul­ti­plier ef­fect.

Le­banon needs such in­vest­ment. It also needs ‘cush­ion­ing’ to main­tain its cur­rent role in host­ing its large num­ber of refugees, in ab­so­lute and rel­a­tive terms. But its po­lit­i­cal class and pol­i­cy­mak­ers need to ad­dress three ma­jor as­pects as a pre­req­ui­site to such in­vest­ment: First, a clearer vi­sion and an aligned strat­egy on how the Le­banese gov­ern­ment should be deal­ing with host­ing this large num­ber of refugees, which needs to ac­knowl­edge the bur­den of host­ing more than a mil­lion war-dis­placed per­sons but also of­fer some sort of tem­po­rary pro­tec­tion. Sec­ond, se­ri­ous re­forms are needed to tackle the en­demic cor­rup­tion that has made Le­banon 136th in the world in terms of per­ceived cor­rup­tion, ac­cord­ing to the 2016 Trans­parency In­ter­na­tional re­port. Donors are, nat­u­rally, re­luc­tant to give large amounts of funds in such con­text. Third, these in­vest­ments need to tar­get the poor­est and most eco­nom­i­cally vul­ner­a­ble com­mu­ni­ties and re­gions, which at the mo­ment carry most of the bur­den of host­ing refugees and have been his­tor­i­cally ne­glected by Le­banese state.

Should the above take place, Akkaris might con­sider re­nam­ing their Ab­deh Square af­ter Keynes. NASSER YASSIN is pro­fes­sor and Di­rec­tor of Re­search at the Is­sam Fares In­sti­tute for Pub­lic Pol­icy and In­ter­na­tional Af­fairs, Amer­i­can Univer­sity of Beirut. He leads the AUB4Refugees Ini­tia­tive.

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