In light of the government’s decision on 17 October 2019, to increase taxes and impose a fee on WhatsApp, protests broke across the country in an unprecedented way. This is not the first time people protest—they have done so in the last decade—but this instance is different. Firstly, it was spontaneous and leaderless as people took it upon themselves to take to the streets, on Thursday night. Secondly, protests are not Beirut centric: They are spread across the country, and in political party strongholds usually immune to such movements, such as Nabatieh, Sour, Zouk, and Tripoli. Thirdly, unlike the 2005 protests following the assassination of former Prime Minister Rafic Hariri, those of 2011 against the sectarian system, or those of 2015 which were triggered by the garbage crisis, this movement is primarily a socio-economic revolt triggered by tax.
Taken aback, politicians had to quickly acknowledge the grievances of the protesters, estimated to be more than one million countrywide, but failed to understand how deep the discontent is. Foreign Minister Gebran Bassil, who is also the head of the Free Patriotic Movement, the largest party in parliament, could not even read people’s anger. He was in such denial that he actually said that “these protests are not against us, they are in our favor,” only to be targeted with damning chants by protesters in the streets. Hassan Nasrallah, Hezbollah’s leader, was defensive as he went at great length to explain to his constituency that he did not betray them, because no new taxes were adopted by the government in the first place—a claim that is not true according to members in the government. He went on to say that, in any case, even if approved, he would vote them down in parliament. The Amal Movement, which was silent for the first three days of the protests, came out to say that they had been fighting for such demands for the last 45 years, failing to recognize that, if true, how this makes them look utterly inept. The Lebanese Forces (LF) and the Progressive Socialist Party (PSP), which were both marginalized in the government, saw an opportunity to bring it down. LF went on to resign, but PSP stuck it out, perhaps, hoping to extract certain concessions from the prime minister. As for Prime Minister Saad Hariri, he came out with a 72-hour ultimatum to his coalition members to accept his reform measures, largely proposed in the CEDRE conference in April 2018.
Realizing how serious the situation is, the prime minister adhered to his self-imposed deadline and announced following a government meeting on Monday, 21 October, a list of 25 policy measures to address the socio-economic crisis.
Putting aside the content of these measures for a moment, it is impressive how, when under popular pressure, the government found the time and effort to produce some policy ideas. In three days and one governmental session, it passed measures and bills exceeding by far the two bills—electricity in April 2019 and the Budget Law 2019 in July 2019—that took more than 35 sessions held between February 2019 and last week.
Some of the key measures that the government adopted after the 72-hour deadline include the reduction of the deficit, no additional taxes on people, adopting a pension law, and fighting corruption. However, many of the measures cast doubt on how realistic they are and fall short of people’s expectations. They came too little too late. In any case, there are several concerns.
It is unclear how the government will reduce the deficit from more than 7% to almost 0.6% of GDP in one year. The task to cut $5 billion is monumental, and after more than 30 years of chronic budget deficit, the fact that it found a way to do so in three days, all without major tax reforms, seems suspicious. It did not provide an implementation to the plan, but the one-time tax on bank profits shows how unsustainable this will be. The government may also be planning to have the Central Bank carry the deficits so that its books would look shinier. Whatever the plan is, a sustainable and fair public finance framework needs to be in place, and it is clearly missing so far.
Reducing the deficit without taxing the people reveals how rotten, arrogant, and greedy the political elites have been. They have consistently taxed working people and made them disproportionately carry the tax burden while arguing that there were no other options. Currently, two-third of tax revenues are regressive and such taxes have increased over the years more than taxes on capital, even though the former’s real income effectively declined in the last decade, whereas the latter had made significant economic gains. The government only backtracked when the unfair tax system triggered this revolt.
The government’s plan to fight corruption is simply ridiculous. The same political parties enlisted corruption as a major electoral demand back in the 2018 parliamentary election, but they have done absolutely nothing to fight it. The government’s plan to adopt the Office of the Minister of State for Administrative Reform’s strategy to fight corruption is simply to appease donors, and to show that it is doing something about it.
This time, people will have none of that.
If it were serious about reforms, the government would have prepared or even adopted the draft law to make the judiciary independent. It would have also strengthened the oversight agencies including the procurement office. These are crucial elements to fight corruption but the government was silent concerning them. In fact, even when the government adopted the electricity bill in April 2019, it undermined the role of the procurement agencies by having a ministerial committee decide on the winning bid—an act prone to corruption.
Tellingly, even the prime minister is not convinced of his own plan, as he states that, in order to avoid corruption in state contracts, capital investment from taxpayers’ money—which is a key part of growth—will be zero. One would have thought that, if credible, the strategy the government plans to adopt would push for clear and transparent procurement systems. To state that the foreign-funded capital investment will be free of corruption is to admit that all publicly contracted projects are already infested with corruption. He should then set up an independent committee to review all these contracts.
Bringing the private sector into the equation through what is commonly known as the Public Private Partnership (PPP) requires serious institutional regulatory prerequisites that the state does not have. Those who argue that we need to adopt PPP because the state is weak and it does not have the capacity are those undermining it and contributing to the public theft in the first place. In fact, for PPP to be effective and positively contribute to the economy, we need an effective state which we currently do not have due primarily to the political parties that have governed over the last 30 years.
As for pension reform, Hariri has provided little information on how it is going to work or be funded. It seems that he was compelled to do so to appease the protesters.
The prime minister also enlisted one of the demands of the people about the “stolen money”. This is the first time that he finally recognizes the issue but he clearly has neither the intention to implement it, nor the mechanism to do so. How could he, when many of those who have contributed to public theft are either politicians or have strong connections to them?
Knowing how the government works, the timeline of the program is not feasible at all. What is missing from the program—in addition to the institutional pillars like an independent judiciary and strong oversight agencies—are the regard for key environmental concerns. The government has so far ignored scientific evidence against the building of incinerators and dams, as private financial interests continue to trump people’s health.
Putting the pieces together, all these policy measures lack credibility, and they hollow out the state rather than build an effective one. The fact that the government rushed into adopting these measures shows how flawed the system is and betrays a failure in governance par excellence. These policy measures cannot and will not be implemented without effective and sustained pressure.
Perhaps, Hariri found the opportunity with the protest to pass key measures and legislations, previously obstructed by his coalition partners, to appease donors and get access to CEDRE money.
This is not what the country needs.
What Lebanon needs is something fundamentally different. We need an effective state that works for the people, an accountable government that we can trust and that listens to people’s needs, and a social contract where rights are protected and taxes are fairly allocated. None of this came through from the government’s plan. People were not fooled and remained in the streets asking for the government to resign.
The protesters have made key gains: Not only have they forced the government to cancel its plans to tax the working people, they have imposed their agenda and are shaping the political discourse in the country. The power of the people is breaking down the walls set up by the political elite on what is possible and not possible. It is moving the red lines of what is feasible and what is not. They have repealed the rules erected by those in power and their cronies and are drawing up their own set of rules. And this is how fair, democratic, and accountable systems emerge.
[This piece was originally published by the Lebanese Center for Policy Studies in October 2019.]