The same tone of careful optimism pervades the Lebanese press today with the regards to the financial crisis. Citigroup reiterated its positive assessment, saying that Lebanon’s economic “insulation” has become an asset under the current crisis. It warned at the same time, that Lebanon is not past the danger mark (Arabic & English links). An al-Nahar writer has even given himself the liberty of dreaming of a return to the “golden age” when Lebanon was the main bank of the region (Arabic link).
A more cautious assessment was delivered by economist Ghassan Dibah in a lecture at the Lebanese Communist Party’s HQ in Witwat (round the corner from the best fawwal in town). While repeating the mantra of the Lebanese banking sector’s relative immunity from the effects of the financial crisis, Dibah outlined three possible dangers:
- Decrease in Lebanese commodities’ ability to compete in European markets, especially because the Lira is linked to the Dollar, which is rising.
- Decrease in migrants’ remittances due to the crisis abroad. This might be somehow off-set by cash flow coming from the Gulf in search for a safe investment haven.
- Increase in unemployment, due to the high rate of exported Lebanese labor or, what he calls, “exported unemployment.”
Dibah also said that while supply and demand is already bringing down real estate values, he thought it unlikely that a real estate crisis will ensue in the near future (since the real estate market is not linked to the elaborate investment schemes that triggered the international crisis).
October 14, 2008 at 1:08 pm
I regret falling asleep in my economics class in high school.
But it appears to me that the world of the greedy is under the pump, not so much the world of the few. The global economy has gone into overdrive trying to finance and supply Western (and American in particular) living standards.
If the Americans can no longer support their living standards, does that mean the world (such as China) stops producing? No. It means countries like China will find new markets, will be able to use its resources on developing its own people, which could sound as good news for Lebanon and other developing countries. Capital will simply move, with the hope that it spreads to the Middle East.
If Lebanon’s banking sector is safe, as your post reveals, then it’s a promising sign. Whether that trickles down to economic development and rising living standards for the Lebanese is another hot debate altogether.
I don’t know if my interpretation is accurate, I’m no economics expert, but what are your thoughts?
October 14, 2008 at 8:18 pm
Well, I’m by no means an expert either. But I have been discussing this with an economist friend who is. Her main reason for worry is that no one is really sure how many people are involved in these investment cycles. So, it might end up popping up in unexpected places. She gave me, as an example, some pension schemes at Lebanese universities.
And there other examples, including investments the world over, which would ultimately affect jobs. The problem is that the world of the greedy is not such an isolated phenomenon and these “toxic” packages might have found their way into the lives of ordinary people outside the West/US. Only time will tell to what extent.
Your view of this crisis as part and parcel of a pandemic consumer culture is interesting. It reminds me of an article I read a couple of days ago in The Independent. Here it is.
October 14, 2008 at 8:19 pm
PS: Everytime I post something under “economy” I get spam comments on insurance and gambling. How funny is that?
October 15, 2008 at 11:27 am
I’ve been following this for a few weeks now, and most of the reasonable analysts have pointed out that our (Western) desire to “want, want, want” is what initially triggered this crisis.
Ordinary Americans (and Australians not far behind) are riddled in debt. They want to buy a house, they take out a loan. They want a new plasma, they take out a credit card. They want a new car, a holiday, a swimming pool i.e. they want the luxury life, but can’t afford it. They use credit.
America’s demand to want, want, want has kept China’s factories rolling at a rapid pace. China’s beaming factories require natural resources, in comes Australia, Brazil, and African nations where there are large reserves of raw materials.
The problem we have arrived at is those American consumers who are forcing this drive can’t afford their materialist lifestyles. They can’t pay back their loans, the banks then can’t repay their lenders and there the domino effect takes place.
The financial system has simply run out of funds to keep up with the desire of many to live the American dream.
One US analyst, who opposed the $700bn bail out, stated that countries like China who are producing goods, and countries like Australia who are supplying China with the raw materials to keep their manufacturing industries functioning, will survive this financial crisis. Why? Because China will simply find a new market to distribute their wealth and produce. In fact, China will be able to pour its strength into developing the living standards of its own nation, and more importantly, that of the developing world.
Instead of the world being the factory for America, the world will now be a factory… for the world.
Many articles that I’ve read in the Western press over the weeks have supported a similar point of view.
If it is the case that Lebanon’s financial sector is one of the few, secure banking systems at the moment, then it is incredibly positive and if manipulated wisely, will attract more money into the country. More money means more local industry expansion, which will translate into more jobs, higher consumer spending and greater living standards.
Of course, that would require minimum corruption and a wise, stable political leadership, our two major obstacles.