How Will the Phoenix Rise?: Informality, Decentralization and Citizens’ Participatory Governance in Post-crisis Lebanon

December 16, 2024

Joseph P. Helou, Assistant Professor of Political Sciences and International Affairs, Lebanese American University

Global trade plays a significant role in conferring economic and social benefits, given that the development of high-quality port infrastructure is crucial for enhancing exports and trade facilitation.

Introduction

Lebanese political discourse has never ceased romanticizing the phoenix, a mythical bird whose self-immolation and emergence from ashes symbolize a renewed sense of hope, confidence, fortitude and strength to rebuild in the aftermath of crises. For a country and region that has experienced no small share of crises, Lebanon and the Middle East symbolize resilience in the face of adversities of a domestic, regional and global nature. The events impinging on the politics, economy and social structures of Middle Eastern states in the past three decades testify to the metamorphosis of society-state relations in the region. The collapse of the Soviet Union, the first and second Iraq wars, the terrorist attacks of 9/11, the 2008 global financial meltdown, the Arab Spring uprisings of 2011 and the rise of the Islamic State of Iraq and Sham are but a few shocks that impacted the politics of states in the Middle East.

Yet, Lebanon, much like its counterparts in the region, harbored deep societal grievances that cast a shadow on the foundational social charter binding citizens to political elites. Whereas the Middle East region from Tunisia to Egypt and beyond experienced a political awakening in the Arab uprisings of 2011, Lebanon’s political system enjoyed a period of relative calm due, in no small part, to its consociational model of governance that enabled the representation of society along sectarian lines and the distribution of resources, services and public contracts in return for persons’ political loyalty in a symbiotic patron-client relationship. With the devolution of some Arab uprisings into civil wars, such as Libya, Yemen and Syria, state-led military interventions and non-state armed insurrections characterized geopolitical showdowns on multiple battlefields across the MENA region. This polarized regional context imposed a heavy toll on Lebanese politics with political bickering over partisan positions towards Arab affairs, the participation of the Lebanese Shia party of Hezbollah in the Syrian conflict and relations with the states of the GCC region.

Once again, Lebanon’s sect-centric actors, whose manifestations of doctrinal, sub-national, national and transnational links highlighted the blessings of consociational politics in the achievement of communal autonomy and political veto, cursed state institutions by way of deep disagreements over the country’s international relations. Their disputes culminated in several constitutional interregnums, with a 30-month vacancy in the position of President of the Lebanese Republic and caretaker governments becoming normalized features of politics in the period 2011 to 2019. Their political strategies succeeded in harnessing spheres of influence inside the civil service and state institutions, which became a hallmark of top-down and bottom-up corruption. Their reliance on the principle of power-sharing brokered partial solutions to political gridlocks with clear drawbacks for the Lebanese economy. As a consequence of these myopic elite-designed policies, Lebanon’s balance of payments remained in the negative as of 2011, starved by double-digit government budget deficits, a negative balance of trade and a fixed exchange rate of 1,500 Lebanese liras to the US dollar that rendered imports more affordable than locally produced goods. As such, recorded economic growth in Lebanon was an illusion that fostered the expansion of the non-productive sectors of real estate and tourism at the expense of industry. These lopsided policies yielded mounting national debt, undergirded by a vicious cycle of borrowing from commercial banks and the sales of government bonds to raise liquidity, which became unsustainable as three-fifths of collected taxes were funneled to settle the interest on the debt.

This period witnessed a sharp decline in the quality of governance services provided due to political polarity in the regional context, internal gridlocks in the decision-making process and corruption festering in state institutions and public contracts. A recent study reveals that Lebanese politicians were in cahoots with project consultants to foster a nasty pricing model for public contracts that bypassed institutional watchdogs, thereby granting contracts at 33% above the actual price (this number most likely underrepresents the degree of corruption in the sector). These governance deteriorations caused Segments of the socially active youth to organize grassroots movements. In 2015, the You Stink movement emerged to protest against the garbage piling on the streets of Beirut, promote more environmentally friendly solutions to waste than landfills and call for more transparent public bids in the waste management dossier. Capturing the spirit of the movement, a common joke boasted about Lebanon’s most expensive garbage-collection contract at $100 per ton (sarcastic emphasis). Even though the Lebanese political elites succeeded in fragmenting the movement at the time, socially active youth built on this momentum to form the “Beirut Madinati” campaign in the 2016 municipal elections, which lost but constituted a serious challenge to the coalition list of Lebanon’s conventional political parties.

Then, in the Summer of 2019, a gap between the official foreign exchange rate of the Lebanese lira to the dollar in banks and the parallel rate in foreign exchange offices emerged. Such a reality worsened the country’s economic conditions when the council of ministers proposed a monthly tax of $6 on voice-IP calls, known as the WhatsApp tax, which drove hundreds of thousands of citizens to the streets in a national uprising that lasted months.

Lebanese protestors demanded an overhaul to the sectarian system, favorable socioeconomic conditions, revamped governance services to receive uninterrupted public utilities and reforms to personal status laws, among other demands, in the October 17 uprising in 2019. Against the backdrop of these crisis conditions, protestors established roadblocks throughout the country, bank closures for weeks encouraged panic behavior among depositors and the value of the Lebanese lira declined on the parallel market. Reacting swiftly, banks imposed a system of unspoken capital controls, limiting the amount of US dollar bills that could be withdrawn from dollar deposits. As the lira gradually lost 90% of its value to the US dollar over the period 2019 to 2023, bank deposits became inaccessible to thousands of citizens, except for the politically connected elites. Moreover, a series of unfortunate events, such as the COVID-19 pandemic, sovereign debt default of 2020 and the Beirut-port explosion of 2020 wreaked havoc on the country’s financial markets, eroded governance services and spawned a rising tide of emigration.

Crisis Politics and Informality

As crisis conditions deepened, the World Bank ranked Lebanon’s sovereign debt crisis among the worst financial crises of the past 150 years. This economic nadir was epitomized in the erosion of existing political, economic and social practices and systems. In the absence of an economic recovery plan and an IMF bailout, Lebanon witnessed a series of failures in governance services, such as limited healthcare coverage provisioned by the National Social Security Fund, interrupted supplies of electricity and water due to ailing infrastructure, ineffective waste management services, increased environmental hazards and constrained expenditures in municipal councils. While some slight improvements in the distribution of these services have been recently witnessed due to greater government budget allocations in 2024 than in 2021 and 2022, they remain short of the services dispensed pre-crisis. However, a comprehensive appreciation of governance during Lebanon’s recent multi-dimensional crises requires a rigorous analysis of the de facto actors emerging to fill the governance vacuum.

The crisis politics of Lebanon highlighted the significance of individuals’ everyday informality in the adoption of coping mechanisms against adversities and the creation of alternative modes of governance. It revealed that informality emerges when the state does not regulate a sector critical to a certain segment of the people or when the state regulates a sector to the dissatisfaction of the people. As Lebanese citizens rushed to fill the void left by state ineptness during the crisis, they dispersed the seeds for the germination of new governance models or the revision of existing ones. Newly emerging governance systems may either witness private actors’ partnership with the state for the regulation of the sector or defiance of the state through independent setups.

Lebanon is home to a variety of everyday coping mechanisms that range from labor practices for additional disposable income, such as part-time work in the hospitality industry remunerated through direct cash payments, to the skilled labor of plumbers, blacksmiths and home-appliance technicians whose unregistered mobile work evaded taxes. This segment of informal labor exploits Lebanon’s seasonal tourism, which typically witnesses an influx of Lebanese expats returning home to enjoy family gatherings, beach destinations and mountain vacations for some opportunities, but remain economically vulnerable due to job insecurities brought about by the temporary and unregistered nature of seasonal work. Moreover, some studies show that spending during summer and winter tourism does not generate the trickle-down effect expected, instead concentrating wealth in the hands of major hospitality corporations. Other examples of informal labor involved thousands of individuals who produce handcrafts, artisans, tailored clothing and natural produce (jams, pickles and molasses) from the haven of their homes. These products and services evade taxes and provide coping mechanisms for economically vulnerable groups.

However, the informality impacting Lebanese politics during the course of the crisis involved the organization of services that were previously governed by institutional actors. The heavy reliance on foreign exchange offices and middlemen for the purchase and sale of Lebanese liras to US dollars and vice versa spawned a system of informal trading to salvage part of the US dollar accounts locked up in commercial banks. This system was mediated, albeit indirectly, by the flurry of the Lebanese Central Bank’s circulars, which regulated the formal exchange rate of the lira, stipulated how much money depositors could withdraw in a given month and intervened in the market to impose a semblance of stability. This culminated in the emergence of an unspoken formula on the market that generated profits for the informal traders of bank cheques while satisfying clients’ demand for cash dollar bills. While this formula enabled a system of cheque discounting that provided individuals 80% of the amount inscribed on the cheque in the first few months of the crisis, the discounted rate skyrocketed with the devaluation of the Lebanese lira on the parallel market. Today, this discount exceeds 85%, providing individuals less than 15% of the amount inscribed on their cheques. This helped create a demand for US dollar cheques at the start of the crisis in order to settle loans in commercial banks.

But these financial transactions delivered tremendous political implications for the economic, financial and banking sectors in Lebanon. Bank depositors’ loss of trust in existing regulations continues to support the establishment of transactions that circumvent commercial banks. Several financial corporations are currently offering their own debit cards that depositors can use in multiple local and international transactions. Some individuals have decided to stash their savings in foreign accounts so long as Lebanon does not adopt an economic salvation plan guaranteeing the existing deposits. More tech-savvy individuals have resorted to the utilization of virtual platforms, investing and exchanging in crypto assets and currencies to bypass regulations and to store value by hedging against the risks of a crumbling lira. This economic volatility has also generated heavy reliance on cash transactions, rendering 47% of economic activity in Lebanon unrecorded.

Moreover, Lebanon’s sovereign debt crisis has also led to numerous non-financial informal practices to navigate the risks of the market. It amplified the country’s existing energy crisis, which witnessed energy deficits of approximately 37% between Electricite Du Liban’s (EDL) production and national demand prior to 2019. With crisis conditions affecting the Lebanese government’s capacity to provide credit for fuel imports for EDL and BDL’s inability to provision the requisite funds for fuel imports as a backdrop, EDL’s electricity generation dropped sharply to approximately 0 to 2 hours a day by the Summer of 2022, increasing the energy deficit to more than 80%.

With the network of thousands of private generators across Lebanon unable to fill this energy void, households who afforded the installation of photovoltaic systems on their rooftops proceeded to generate their own electricity. Eventually, such behavior increased the solar generational capacity from 90 MW prior to the crisis to approximately 1,00 MW by the end of 2023. Of course, this ad hoc and chaotic pattern of PV installations on rooftops created a set of challenges in the absence of state regulations of the sector, but it did foster important coping mechanisms amid Lebanon’s multi-dimensional crisis for those who afforded the expensive technology. With an increase in the installation of PV systems, the combined effect of hybrid governance actors in energy governance in Lebanon (EDL, private generators and PV systems) has restored energy around the clock, reinforcing the economic imperative of subscriptions to two out of three of these options.

Similar informal practices, epitomized in the grassroots initiatives by NGOs and loosely formed committees of residence, have begun to impose an ad hoc semblance of order in waste management across select towns and villages. Although these individuals do not possess the enormous capital and licenses required to establish recycling centers, they cooperate with existing recycling centers in the management of the supply chain of recyclable material. These volunteers raise awareness among households on the need to classify waste, collect material from designated bins in certain towns and transport the material to recycling facilities. Some NGOs encourage citizens to recycle plastic material since they use the proceeds from the sale of plastic to finance hearing aids for the hearing impaired.

But the main question resulting from the rising number of informal practices in the midst of Lebanon’s multi-dimensional crisis is how the centralized state will recover. Is Lebanon doomed to supplant institutional solutions with grassroots citizen-led initiatives?

Governance Transitions and Reforms

Except for a few interventions, the academic debate has yet to explore the possibility of political transitions to emerge from the quagmire of Lebanon’s political-economic crises. Typically, transitions tend to drive actors from point A to B through pathways that establish a phased plan, achievable objectives and incremental gains towards a desired policy outcome. Therefore, a major political blunder would be returning to pre-crisis conditions by establishing a centralized distribution of governance services where political predators prey on state resources. Another major fault would be overlooking the contributions of grassroots, ad hoc and informal practices that emerged during Lebanon’s multi-dimensional crisis of 2020. A few of these informal practices may cluster into national security concerns, especially if they occur in the shadow economy. But the emergent ad hoc solutions cannot be destroyed, despite their informality, let alone rebooted back to 2019 without a comprehensive role in Lebanon’s post-crisis governance.

On the political level, the realization of a more participatory governance model requires the complete implementation of the Taif Accords with an emphasis on the clauses revamping governance models. The implementation of the Taif clauses on decentralization will require no major revisions to the text itself, but a reconsideration of the political practices that undergird Lebanon’s vicious political-economic model.  Stated differently, Lebanese political elite practices have concentrated heavily on brokering power-sharing arrangements and solutions to deepen sect-centric actors’ spheres of influence inside the Lebanese state, often sabotaging the effectiveness and operations of state institutions. According to an application of Giddens’s theory of structuration to Lebanese sectarian politics, it is these elite practices that inspire political structures and systems, which, in turn, reinforce the personal and communal political mindsets on the basis of inter-group competition. But again, a realistic prognosis of Lebanese politics cannot imagine the debilitation of sects’ identity in local communities, national politics and transnational relations overnight. In fact, members of sectarian groups, both politicians and citizens, might stiffly resist drastic amendments to the existing consociational model, especially if they perceive a political or economic advantage for their communal counterpart at their expense.

Yet, the case of Lebanon’s crisis politics has revealed that the atomization of governance services, though appearing to be counterintuitive in small-scale projects, operates quite efficiently in Lebanon because it decreases the number of political elites jockeying for the domination of the sector. Also, Lebanese citizens may experience a reliable service in small-scale projects, in addition to increased access to service distributors in municipal councils.

Illustrating this point, the approximately 1,200 MW capacity of solar energy installed in the form of households and businesses’ PV systems during Lebanon’s multidimensional crisis has imposed a semblance of order in the energy sector by meeting part of the national demand. However, the absence of viable state regulations (the installation of a net meter, agreement over tariff and regulations regarding collection of dues) confines this capacity to the owners of PV systems, instead of plugging these systems to the energy grid where excess production can be distributed to other households.

Therefore, Lebanon should accommodate more participatory political, economic and social governance services. The most conducive site for such political reforms is municipal councils where Lebanese politicians failed to promote their favored candidates on several occasions in the 2010 and 2016 municipal electoral cycles. This reality speaks volumes to the distinct features and communal preferences of individuals in local councils. While patron-client relations cannot be ruled out from municipal electoral cycles, nor corrupt practices such as alleged instances of vote buying, the management of elections inside local councils tend to reflect the overwhelming sentiments of citizens towards the performance of the council’s members, particularly the head of the council (mayor). Of course, the representative character of these municipal councils is restricted by the nature of Lebanese laws, which prevent the participation of voters in their area of residence. Instead, these voters are expected to vote in their area of registration, e.g., a resident of Beirut or Mount Lebanon who hails from Sidon should travel South to vote on election day.

However, Lebanese citizens seem to be concerned with the advancement of services within their local councils. They have mobilized for “not in my backyard” movements to protest against the designation of a landfill or incinerator in their town and village in the past decade. This fostered powerful mobilizing triggers on the sub-national level of politics, which could, in turn, constitute grounds for the municipal governance of multiple energy, environmental and administrative services.

Proposals for administrative decentralization in Lebanon have appeared to be a double-edged sword. On the one hand, these proposals can sow enormous political discord between proponents of centralization and advocates of decentralization, with the former accusing the latter of undisclosed political intentions to federate the Lebanese state into sectarian cantons. Such political polarization generates incendiary media coverage and comments on talk shows that typically misrepresent the concept of administrative decentralization, portraying the concept as a gateway to self-autonomous regions within a single state. On the other hand, administrative decentralization can only permit the management of projects in local councils. If expansive enough, it may welcome investments in critical infrastructure within local councils depending on the degree of citizen participation in local governance. However, it cannot supplant the central government’s capacity to legislate laws, levy taxes, deploy armed forces and/or determine national policies in the fields of health, education, labor, economy and finance, inter alia.

Here, administrative decentralization and its associated atomization of governance services may be the right antidot to remedy the ills of clientelism afflicting the Lebanese body politic because these administrative arrangements decrease the number of brokers of services in the public administration rendering more efficient and transparent provisions of services. While the above-mentioned analysis drew on a few examples for illustration, such logic may be applied to numerous political, social and economic transactions governed by the state and public administrations in Lebanon. For example, the application to official positions, private sector jobs and the issuance of a passport require a personal ID card (Hawiya), in addition to personal identification or family identification registries (Ikhraj Al-Qayd). The latter are generally valid for three months after issuance by the Moukhtar (an elected local public representative across Lebanese cities, towns and villages whose sole prerogative is the verification of applicants’ home addresses and identification documents). This public official stops short of authenticating documents, which is the sole prerogative of the notary public. But such a complex arrangement for otherwise simple tasks squanders not only time and money but also states efficiency and reputation by mounting fees for every service conducted throughout this chain. A viable alternative to this arrangement could be made possible through the implementation of E-government services where citizens’ records are safely stored on a secure server, thus facilitating their applications and decreasing fees.

Conclusion

Adequate policy reforms that aim to achieve results following the multi-dimensional crises in Lebanon must integrate and streamline grassroots solutions in institutional regulations. The above argument revealed that the transitions occurring amid Lebanon’s multiple crises inspired a set of social forces that are impossible to quell. From seemingly simple acts such as the installation of PV systems on rooftops to waste management and currency trading, citizens in Lebanon manifested their dissatisfaction with state-run services by forging new patterns of governance. While some of these new patterns of informal governance, such as currency and trading, may re-settle in their original domain of state prerogatives, many others are here to stay. Therefore, the most efficient allocation of resources and policy proposals are those that account for the rise and existence of new political, social and economic forces by imposing adequate regulations for order in multiple sectors.