Lebanon, Inc. I: Mergers and Acquisitions
By: Jamal Ghosn
Published Wednesday, January 25, 2012
The battle waged by Lebanese Labor Minister Charbel Nahas to pass his wage increase proposal turned out to be futile. The confrontation over what is often a routine periodical decision pitted allies within the same government against one another, not to mention the Future Movement-led opposition, which still holds clout in decisions pertaining to the economy. Understanding the power mechanics that govern post-war Lebanon can help explain how this one government decision can polarize the political scene so much. For that, a look back to the end of the civil war is necessary. Part one of this three-part series looks at the rise of the post-Taif establishment.
The Taif Accord
Credited with ending the 15 year civil war, the 1989 accord was signed by various Lebanese factions in Taif, the Arabian peninsula's mile high city. The power sharing formula devised under this national pact allowed Lebanese warlords to trade in their militia influence for a slice of Lebanese government. Rafik Hariri, a Saudi-Lebanese billionaire and godfather of the accord, would eventually be tasked with leading the ensemble of fighters turned statesmen. The Taif accord was also the foundation of the S-S equation in Lebanon. This refers to the balance of influence between the two major regional players in Lebanese affairs: Syria and Saudi Arabia.
Left off the Taif roster were the exiled former head of the Lebanese army General Michel Aoun and his significant number of followers, and Hezbollah, which were granted the right to keep their weapons for the sole purpose of resisting the Israeli occupation of vast parts of South Lebanon.
The end result of the Taif accord was a delegation of tasks between an economic camp and a security camp, a reality that would be enhanced over the next decade. Both camps scored victories that helped them consolidate their positions with time. The security camp, whose main components were the state's security apparatuses along with Hezbollah, earned their stripes by successfully liberating most of the Israeli-occupied territories. The economy team, led by Rafik Hariri and a number the country's historic elite, championed the role of reconstruction with downtown Beirut showcased as the trophy.
The heavy Syrian influence on both camps allowed for differences between the two sides to be shelved and critiques to be silenced, except on some occasions where bargaining muscle was needed.
Rafik Hariri was an outsider. The prime minister’s office in Lebanon was traditionally reserved for certain bloodlines. The fraternity of political elites had a nearly impossible initiation process. Yet, Hariri wanted in and he had a plan to do just that.
After a distinguished business career with notable success in the fields of construction and banking, Hariri would use these fields as cornerstones for his economic plan for Lebanon. A network of strong public and family relations and an innovative media presence would complete the foundation needed to conquer a home country that treated him as a foreigner.
Lebanon was coming out of 15 years of war in which a variety of weapons were used. A direct and very visible consequence of war is the physical damage that it does to buildings. While bullet holes can be spotted in every neighborhood of Beirut, the downtown area was the most devastated as it saw the most fierce street battles in the early years of the war.
Rebuilding the center of town was important not only for aesthetic reasons but also as a final punctuation point declaring that the war was officially over. The glittery rebuilt city center promised to revive Beirut's lore and lure tourists with deep pockets.
First though, money had to be invested in the reconstruction process. Local banks stepped up. Owned by a dozen families of Lebanon's old guard, the financial institutions were eager to cash in on the lucrative interest rates that the Hariri-led Lebanese government was willing to pay for reconstruction money. Rafik Hariri was becoming less of an outsider.
Cash was readily available in the banks due mainly to an oil boom, and the Lebanese government ministries all had rebuilding projects. The fact that these ministries were run by the same people that made rebuilding necessary in the first place was just a side note. Public debt ballooned. The term Harirism entered the Lebanese political jargon. However, its use by Hariri’s friends and foes alike singled him out for any blame associated with fiscal mismanagement, which was unfair. His Taif warlord partners were just as responsible for the crippling corruption that was afflicting the government coffers.
Crisis struck when the money supply ran low. The hiatus that Hariri was forced into at the end of the 1990s exposed a hole in his grip over the Lebanese economy.
Hariri had a chance to address these gaps when he made his comeback in 2000. His comeback was accelerated partly by the need to keep the balance between the camps, especially as the forced withdrawal of Israeli occupation neared, marking a significant milestone for the security camp.
Labor unions, syndicates, and economic committees were the next frontier. Backed by an electoral victory and the full support of shareholders, Hariri proved his weight and tightened his grip – either with loyalists of his then unofficial Future Movement or through proxies – on a number of institutions that had influence on what became the business of economic policy making. It’s worth noting that there were instances where official security apparatuses lent muscle to the Taif establishment to solidify the economic model for Lebanon.
The final word was still with the leadership in Syria, but the contradiction between conflicting strategies within the same state was becoming more and more apparent, putting the new leadership in Damascus to the test.
Lebanon became a country standing on diverging poles, or rather pogo sticks. Its economic strategy was designed for a sterile environment that looks nothing like the “creative chaos” looming on the horizon. The resistance strategy saw economic planning as an additional hindering burden that was not on the priorities list.
The Taif economic establishment and the paramilitary team were consolidating power and monopolizing policy and decision making in their respective camps. With no further vertical expansion possible for the two camps, horizontal growth was the only way to expand. However, that meant stepping on the other camp's toes instigating an untimely clash given the uncertain atmosphere emerging in the region following the invasion of Iraq.
UNSC 1559 and the extension of Emile Lahoud's term as President of the Republic flared tempers between the two camps setting the stage for a summer showdown in the 2005 parliamentary elections. Rafik Hariri resigned as Prime Minister preferring to face the pivotal challenge as an opposition figure.
On 14 February 2005, Rafik Hariri was assassinated.
One month later, the “March 8th” and “March 14th” labels were born.