The deadly explosions in Lebanon in August 2020 and August 2021 made global headlines for the devastating loss of life – the Beirut explosion in 2020 killed 218 people and injured over 7000. But these two tragic events highlight an even bigger crisis taking place: Lebanon is experiencing the worst financial collapse since the mid-1800s, according to the World Bank. The country is still experiencing the after-effects of a 15-year civil war and a severe fuel shortage. Handling two serious explosions less than a year apart whilst in an extreme economic crisis? Near impossible.
Here’s a basic Explainer on how Lebanon got here and what needs to happen next.
The Historical Context
1975 – 1990 Civil War
Lebanon’s civil war began in 1975 and ended in 1990. There were many intersecting tensions that ultimately sparked the war (as is the case with all wars, really) but for simplicity we can distill it down to this: a struggle for power and territory between Maronite Christian clans, the Lebanese National Movement (a group of secular leftists and Sunni Muslims), Shi’ah Muslims, the Palestine Liberation Organisation, and at times, Syria and Israel. Editor’s Note: This article is not an Explainer on the war itself – to learn more about the Lebanon civil war, try this ThoughtCo timeline or Chloe Kattar’s summary (also embedded below).
It is estimated that 120,000 were killed (although the true number is likely to be much higher) and almost 1 million people migrated away as a result of the war. This had a devastating impact on the country and left it in a fragile position.
1990 – 2010 Post-War Recovery
As part of the attempt to recover from the war, Lebanon stabilised its economy by investing in tourism, foreign aid and financial services. However, a significant source of income were ‘personal remittances’ from the Lebanese diaspora – those who had left, now living and working in other countries, voluntarily sending money back to their families.
But relying on gifted income is unreliable and in 2011 that income stream dried up.
2011 – 2019 Government Corruption & Crash
You know the saying, “You’ve got to spend money to make money”? That’s basically the strategy the Lebanese government tried to execute. The banks in Lebanon are tied closely to the government. They started offering extremely high interest rates on saving accounts,incentivising people to save their cash, rather than spend it. The government then used the money its citizens savings accounts to pay for what it needed to.
It was essentially a national Ponzi scheme. A Ponzi scheme is a fraudulent system where you borrow money off Person A with a promise to pay interest, only to borrow more money from Person B to pay off Person A. The scheme leaves the borrower constantly chasing their tail – the Lebanese government was doing this on a national level. Years of corruption and bad policies meant Lebanon had failed to develop any reliable economic drivers to generate the money the government needed to pay back any of the debt.
This led to the current financial crisis which ‘officially’ began in 2019.
Lebanon Now: Extreme Economic Crisis
Because the Lebanese banks and government have spent their money, the Lebanese people no longer have their savings (or are left with a drastically reduced amount). Half of Lebanon’s population live in poverty and with many say conditions are worse now than during the civil war.
Since 2019, the Lebanese pound has lost 90% of its value making its exports uncompetitive within the foreign market. In 2020 the inflation rate was 84.9%, with no signs of a decrease any time soon – for context, Australia’s 2020 inflation rate was 0.87%. The impact that such a high inflation rate has on the prices of everything in Lebanon is crushing – a sandwich that cost 5,000 Lebanese pounds a couple of years ago would now cost 20,000 pounds.
With no money of its own, the government is unable to provide for its citizens. It cannot provide electricity, forcing people to going without or spend money on privately owned, diesel-powered generators. This has contributed to fuel scarcity, with citizens lining up for hours at the chance to hopefully fill their tanks – if the station doesn’t run out before they reach the pump.
The supply of medicine has become unreliable as the government has ceased subsidising it. Lebanon’s hospitals are unable to cope with these shortages, warning that they risk closure if immediate change does not occur. This incredibly fragile medical system then had to treat the thousands injured in the 2020 explosion, and has been pushed to its limits again with the 2021 explosion.
Overall, the crisis has caused another wave of migration, as Lebanese people with foreign passports and skills leave their country in search of jobs, better incomes and a lower cost of living – this is not dissimilar to the mass migration of Lebanese during and after the civil war.
How does Lebanon get out of this crisis?
This is a complex issue with many citizens lives on the line. Since 2020, protests around the country have demanded that President Michel Aoun resign over his mismanagement of Lebanon’s economy (elected in 2016 – another complicated story on the path to the current crisis). The next general election is set to take place in May 2022 and many are looking to this date as their opportunity for radical political change.
To help the most vulnerable Lebanese citizens the United Nations has developed an Emergency Response Plan for Lebanon, but like all humanitarian aid, it is not a long-term solution. The UN believes that the solution to the crisis comes from structural reforms within the state and government-led interventions, including a social protection strategy – essentially, jobs for a government. The UN won’t interfere in that process, all it can do is demand the government step up and make the changes needed to help their own people.
If you want to support the aid efforts, donate to organisations working to help people on the ground: Médecins Sans Frontiers (Doctors Without Borders providing medical assistance); Meghterbin Mejtemiin’s fundraiser to provide solar panels to Lebanese homes; or non-profit Beit el Baraka, helping people in Lebanon with the rising cost of living. But remember that because of the reasons why Lebanon is in crisis, its problems cannot be resolved through foreign aid alone. The Lebanese public have to fight for a government and political leaders that will completely reform and repair their structures and systems – a huge task, that can be supported by other countries and governments, but ultimately needs to be achieved by the people.
