Can Lebanon function better without a state?

For the last six years, Lebanese society has survived without functioning state institutions and even without banks. If anything, the state has, in the past decade, been more of a liability than an asset. The country’s economic and financial collapse was largely due to the dysfunctional state accumulating debt, draining resources and refusing to acknowledge any responsibility. If anything has been achieved since, it was despite the state, not thanks to it.
Yet the government is about to issue a financial gap law, throwing the main burden of the financial crisis on the banks and their depositors — and consequently on the Lebanese economy and society. The supposed aim is to rebuild the state and preserve its assets. This is like punishing the survivors and finishing them off.
The financial crisis of 2019, the Beirut port explosion of 2020, the COVID-19 crisis and the consequences of the war with Israel have all been dealt with practically without any help from the state. This was not by choice. Lebanon has had to accommodate and survive with a semi-paralyzed state practically since the assassination of former Prime Minister Rafik Hariri in February 2005 — if not before.
In the last year, the country imported about $17 billion of goods without recourse to letters of credit issued by local banks. Ask any lawyer and they will tell you that most of their work has consisted of resolving disputes through arbitration with less and less recourse to the courts. The law is applied to everyone except the real criminals. Education and health services, as well as support for the poor, have long been provided by private, religious and civil society institutions. Some state functions work only when civil society cooperates with them.

The state, instead of helping to rebuild trust, is further eroding it by accusing the whole society of corruption.

Nadim Shehadi

On the eve of the collapse, Lebanese businesses adjusted by largely moving their activities abroad, while banking and basing themselves inside the country. After the crisis, they also began banking abroad. Families lived in Lebanon and enjoyed excellent education and health services. The quality of life was good, if the state left you alone. Now, they are also moving their families abroad. The main damage caused by Hezbollah was through its control of the state, which eventually led to it bankrupting the whole country.
One glance at the distribution of public sector salaries just before the crisis is quite revealing. The army and security sectors made up 68 percent of total salaries. Yet the plan is to spend even more on the army — an army that is rightly not meant to fight either internal or external wars. Public education, in a country where up to 80 percent of education is nongovernmental, amounted to another 17.5 percent. These figures resemble a welfare system in disguise, an unproductive burden on the economy.
The rest of the salary bill, a mere 13.5 percent, was for the entire remainder of the public sector. No wonder it was not productive. What bankrupted the country were the black holes of state subsidies and corruption in the energy sector. Added to that was the state borrowing to service debt and the hidden costs of wars, paralysis and the capture of ports and airports and all other sources of income.
There is a big fallacy that depositors are only a minor proportion, about 20 percent of the population, and that you cannot compensate them from state assets that belong to the other 80 percent. In reality, everybody lost from the collapse, not just the depositors. The revival of the economy will also benefit everybody, perhaps especially those who may not have bank accounts and who depend on jobs provided by the private sector.
Another far more harmful fallacy is that of chasing depositors who may have had irregularities. This casts doubt on the integrity of the financial institutions that took in their deposits. The state, instead of helping to rebuild trust, is further eroding it by accusing the whole society of corruption.
On the bright side, Lebanon may have an advantage from a historical perspective. The way the welfare state has evolved since the Second World War is now a problem globally. It has suppressed and replaced other voluntary and traditional measures of support with the idea that such support is every citizen’s right and it is an obligation for the state to deliver and fund it through raising taxes. The state gradually took over and replaced these traditions until they were almost forgotten. It is not a secret that this system is now in a deep crisis.
Every state in Europe is trying, and mostly failing, to roll back state expenditure. In France and the UK, for example, politicians are in denial and are trying to maintain the unsustainable. The result is inflation, a debased currency and ballooning debt. Eventually it will all fall down.
In September 2013, King Willem-Alexander of the Netherlands gave his first speech to the Dutch parliament, in which he explained that the welfare state model was no longer viable. This was also a call for a return to traditional religious and charitable organizations, as well as other community institutions like guilds, professional associations and mutual aid societies, often run at the local level.
The state in the 20th century tended to borrow from Darwinian and Marxist ideas, in which humanity is greedy and selfish and, if the state does not dominate, people will exploit each other.
One of the assumptions of antistate anarchist theorists is that human nature has good in it and that people mutually help each other out of sympathy.
In the past six years, Lebanese society has shown that it can operate better with the anarchist assumptions and the government should take this into consideration when building a vision of the future. If the Lebanese need a state, they can do without a predatory one.

• Nadim Shehadi is an economist and political adviser. X: @Confusezeus