How spending could ease suffering

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.