About two years before the recent collapse, at a dinner, a then (slow thinking) member of the Lebanese parliament kept bugging me for an economic forecast. There was already some anxiety in the air. My answer was that we were facing imminent financial disaster, but that it was not necessarily bad news, long term. Why? Because such a total collapse could lead to natural responses that are better than the one we would have spontaneously, going from patching bad stuff to patching worse stuff. The lira was artificially kept too strong for any industry to survive and the financial system (the Ponzi) was sucking up all the money and destroying the economic substructure. But my point was that the (unavoidable) collapse would lead to an adaptation, the weaning from chronic foreign “loans” and, possibly, a huge bounce. De-financializing the country was a necessity, and people never do that spontaneously. Nothing was going to be fixed without a collapse. Was I optimistic? pessimistic? He was trying to figure out what I was saying and couldn’t get it as it did not fit his elementary static classification.
Let me explain. Natural systems overcompensate, bounce back from stressors quite effectively. If I stress my body by lifting weight, it will grow muscles, improve bone density and my overall health. If I pop pills, the opposite would happen. If I lower my voice or whisper, forcing you to make an effort to hear me, you will upregulate and thanks to the additional exertion, concentrate better on what I am saying (and remember the conversation for much longer). See Antifragile for more details. But note that 1) all stressors are not necessarily good (falling one meter is good for your bone strength, ten meters… not so much), 2) overcompensative responses require, to take place, a healthy overall environment.
So the worst thing you can do to a country is give it oil or some valuable resource, and not just because of the so-called Dutch disease (resources wreck the rest of the economy). Unlike today’s Saudi Arabia, the Phoenicians (coastal Canaanites) had practically nothing (except wood) and no copper when it was fashionable to have some (that is, during the Copper Age). So they learned to sail largely to get the mineral from Cyprus (incidentally named after it), and the rest of the overcompensation is history. Once you learn to go to Cyprus you can figure out how to go elsewhere, once you learn to buy you figure out how to sell, and once you learn how to build a network, you exploit it to the hilt. Similarly, today, Singapore and Honk Kong are the most successful economies, while devoid of resources — Singapore needs to import water. The same applies to similar historical successes: the Dutch Republic, Venice, Genoa, Carthage. Consider the postwar bounces by Germany, Japan, Soviet Russia, etc.
So we are entering a phase in Lebanon when people are suddenly forced to remember there is such a thing as a soil and something called agriculture, so they have started focusing on home grown items — when their ancestors had toiled to terrace the mountain to squeeze every grain of sorghum or wheat from it.
The other positive element is that people in Lebanon are starting to understand that the central government has been too incompetent to improve things — actually, the government has been (and will be) the problem. Municipalities had to take matters in their own hands, some with extreme success (Zahle). The geopolitical discourse (Saudi Arabia vs. Iran, Neptun vs. Saturn, etc.) became finally stale: localism got a boost, as people are now realizing that garbage collection, water and electricity matter more than global affairs.
Finally what are the conditions for positive adaptations? All we need the government is to ensure good communications (i.e., now, good access to the internet), safety and — whether we like it or not — a freely floating currency. For the most important condition for a real bounce is a good educational system and, what is not well known, Lebanon has comparatively extremely high level of technical sophistication, as evidenced by the chronic brain drain. (I explain in Antifragile why high school matters far more than college). And the brain drain has been stopped by COVID 19 — in fact many Lebanese in the tech industry are telecommuting, as work visas in the West have been frozen. And while the state Ponzi killed the small crafts (carpentry, artisanal workshops) it has, so far, preserved the educational level of the youth. Something in the Lebanese culture still favors antifragile responses.
Note: Any newspaper or blog in Lebanon can translate, republish (except for L’Orient Le Jour), provided it is in full.
Comment 1: The Lebanese are too fixated on corruption. It is bad, it causes a loss of social trust, it brings unfairness. But corruption does not necessarily slow down economic activity — red tape and patronage do. Just consider how many places thrived (Rome, Renaissance Italy, the Industrial Revolution, etc.) in the presence of a high level of corruption. Furthermore, localism tends to reduce corruption.
Comment 2: BANKING. The idea of “financial center” is obsolete. Banking is no longer a “thing”, and will be even less so in the future, partly because of an acceleration of disintermediation (funds), alternative clearing methods (Paypal, Apple cash, Google, Venmo, etc.), letters of credit alternatives. It is now associated with the state Ponzi. Banking, to summarize, is now a technology thingy.
Comment 3: UNIVERSITIES. Also a thing of the past, which is why I insist on high school education. You don’t need too many university classroom lectures, rather tutors & examiners guiding students through the web. 90% of the courses can be subcontracted. I’d rather see students learn from a top computer scientist on Zoom under the supervision of a local tutor than some local professor. We moved #RWRI to 100% online and many Lebanese are participating remotely. Universities are now a social media thingy.