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Middle East & North Africa
Deindustrialization in the Middle East and North Africa
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Middle East & North Africa
Turning a (Sinking) Ship: Prospects for Change to Lebanon’s Political Economy
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Middle East & North Africa
Austerity in Egypt: Gendered Effects and Disproportional Harm
Processes of deindustrialization have set the course for postmodernity. Though its impact varies with geography, it is deindustrialization which defines the conditions of social, political, and economic life across most the world today. This is certainly so in the Middle East and North Africa (MENA). There, premature deindustrialization bequeaths legacies of grave and enduring salience. In the economic domain, effects are observable in the region’s struggles with job creation, productivity, growth, and macrostability. Socially, they are present in MENA’s extreme levels of inequality. Politically, deindustrialization contributes to democracy’s recurring failures to launch.
This report takes identifying the drivers behind deindustrialization in the MENA as its primary task. Based on months of desk research and an extensive exploration of the historical archive, we trace causality across time and beyond the borders of the region. Findings are many, prominently including the following:
(i) The early onsetting of deindustrialization in the MENA was provoked by the global economy’s drift into stagnation beginning in the late 1960s.
(ii) Due to global issues of overcapacity and falling profit rates, securing the investment needed to nurture competitive manufacturing sectors has been exceedingly difficult.
(iii) Though global dynamics did make opportunities for healthy industrializing scarce, they did not condemn MENA countries to the fates ultimately suffered. Political choices and policy errors also played a role in shaping the course of events. Critical in these regards were modalities of state-capital relations, inadequate policy design, and a series of contingencies derived from the management of natural resource endowments.
(iv) Neoliberalism’s resolution of capitalism’s profitability crisis harmed MENA’s industrial prospects significantly. The deepening of global value chains over the past forty years has been detrimental to capital accumulation. The enforcement of intellectual property claims has obstructed traditional pathways to industrial progress. Furthermore, competitive pressures have forced firms to adopt capital intensive forms of production, limiting industry’s capacity to absorb greater shares of MENA’s workforce.
(v) The corporate welfarism that many MENA governments have institutionalized in hopes of attracting foreign investment in recent decades is fundamentally misguided: The extension of non-conditional benefits to corporate actors serves only to minimize the social and developmental utility of a prospective investment.
Looking ahead, it is plain that deindustrialization will continue weighing heavily on the region’s outlook. For a better future to be realized, local policy officials and members of the international community alike will need reckon with the factors compelling deindustrialization. Materially, this requires rethinking the terms and incentives governing matters of production, trade, and investment.
This publication has been supported by the Rosa-Luxemburg-Stiftung. The positions expressed herein do not necessarily reflect the views of Rosa-Luxemburg-Stiftung.
The year was 2005. Rafik Al Hariri, ‘Mr. Lebanon’ to most, was assassinated by a truck bomb as his motorcade passed the St. George Hotel. In addition to the suicide bombers, twenty-one others perished in the attack.
Al Hariri’s golden soles would never again grace the Grand Serail or the Parliament.1 His death prompted the Prime Minister, Omar Karameh, to resign, the second occasion that outside events cost Karameh leadership of the government. Around the same time, Bashar Al Assad ordered his troops to leave Lebanon, ending an occupation which outlasted that of the perennially lebensraum-hungry Israelis. Over the months that followed, a number of prominent intellectuals – stalwarts of a disoriented Lebanese left included – were killed, the perpetrators a mystery until the present day.
But not all was doom and gloom. Bosta graced theater screens. In the film, a troupe of young dabke dancers seeks to ‘modernize’ the quintessential Levantine dance by combining elements from the “east” (such as the whirling practiced by Sufi darwishes) and the “west” (mainly electronic and hip hop). Before a panel of narrow-minded older judges in a national dabke contest, they are chided and denounced for a heretical affront to Lebanon’s cultural heritage. The film had all the trappings expected from a Lebanese cultural production of the time: An expatriate returns home after a long absence. They embrace loved ones at the Beirut airport under the logo of Middle East Airlines, the country’s private national carrier wholly-owned by the central bank: Set against a symbol of the state’s economic and cultural history, the intimate scene is meant to raise questions about identity and the tension between tradition and modernity. And in the backdrop, the shadow of political violence and civil war. Lebanese kitsch at its finest, best appreciated with a sense of irony. Nothing screams tradition more than dabke and emigration after all, all the more so once emigrants’ remittances, real estate investments, and pilgrimages home became the threads keeping the country’s economy afloat. That Bosta’s director was also responsible for the safety video aired on Middle East Airlines’ flights, a video which moonlights in tourism promotion, was perfectly apropos: fasten your seatbelts against images of dabke and sights of Lebanon’s mountains and coast.
Bosta’s depiction of dabke and the darwish offered one vision of Lebanon – dynamic, innovative, and entrepreneurial. An earlier portrayal of Lebanon\’s relation with the darwish, however, rendered the country in a contrasting light. In ‘Al bahhar wal darwish’2, the towering poet Khalil Hawi presented a rotting, grotesque and repugnant creature entangled in the land, a land made barren and desolate. Misanthropic and nihilistic, the darwish would taunt adventurous sailors seeking salvation. An allegory for the malaise confronting Arab societies in the post-colonial period, Hawi captured the dejection and unease which centuries of subjugation to Europe and the ethnic cleansing of Palestine compelled. When the Israeli army once again invaded Lebanon in 1982, reaching Beirut in a trail of carnage and destruction, Hawi’s outrage at Arab states’ inability to act pushed him to take his own life in a final act of protest.
Toggling between Bosta and Hawi – Lebanon in the 21st century
Following the implosion of a debt economy which had managed to reproduce itself across decades, collapse creeps into every facet of life in Lebanon today. Since 2019, the country has been thrust into a set of prolonged crises – economic, financial, political, and social – pushing more than 80 percent of the population into multidimensional poverty amidst hyperinflation and skyrocketing unemployment.
Yet even in this moment of collapse, Lebanon oscillates between Bosta’s cultural performance of ‘normalcy’ and Hawi\’s pictures of horror. The hybrid modernity imagined by Bosta persists in fragments: It is visible in society’s clinging to symbols of cosmopolitan identity (as exemplified in renewed tourism campaigns), the circulation of nostalgic cultural productions, and the collective will to “keep going” despite it all. Alas, the disjointed, alienated landscape of Hawi resurfaces in everyday life, too. This alternation is not accidental. It is a function of the normalization of crisis itself – a condition in which collapse becomes routinized and livable, allowing both optimism and despair to coexist without resolution. The cultural grammar of post-2019 Lebanon is thus neither Bosta nor Hawi, but a recursive movement between them, sustained by the affective and material conditions of ongoing breakdown.
This juncture begs asking: How did Lebanon descend to a state where crisis itself becomes the condition of continuity – where national life oscillates between the disjointed despair of Hawi and the resilient optimism of Bosta? And more urgently: does this normalization of crisis foreclose the possibility of charting a way out? Might it instead give rise to new forms of cultural and political articulation?
The Architecture of Crisis
Lebanon’s political economy, long before the financial crisis, was structured around an extreme form of market liberalism. After independence in 1943, the state adopted what would later be formalized as neoliberalism: unrestricted capital mobility, deregulated trade and migration, and a minimal, austerity-driven state apparatus. Ideologues like Michel Chiha provided an intellectual scaffolding for this project, mythologizing Lebanon as a “miracle” economy – a merchant republic uniquely suited to serve as a regional hub for finance.3 In reality, such an ideology rationalized the construction of an anti-welfare enclave for elites and expatriate capital. Atop this edifice, the long civil war merely introduced new forms of privation and exploitation.
Nor did the postwar economy break from war economy logics: it was its extension. After the Taif Agreement, the same sectarian and capitalist coalitions that presided over the violence reconstituted themselves as economic stewards, now enriched by massive debt issuance, privatization of public land, and the dismantling of regulatory and redistributive institutions. The 1991 law creating Solidere marked the symbolic and material erasure of the public sphere: private shareholders were granted downtown Beirut in exchange for evaporated property titles, and public land became fodder for capital ventures. When, in 1992, the Lira came under speculative attack – reportedly fueled by political banks such as Hariri’s Banque de la Méditerranée – wages collapsed and savings were gutted, completing the process of postwar economic subjugation.4 At the time, Lebanon’s central bank, the Banque du Liban (BdL), was clear: it was not going to intervene to contain the damage.
Mr. Lebanon famously said that civil peace after 1991 had been bought through the public debt. A state perennially short on cash – and what a state the post-war Lebanese administration was – had to borrow money to keep its operations, clientelistic or otherwise, running. This need helped bind a multiconfessional creditor class together and to reduce the material attractions of war. But the role of debt extended even beyond this. It became constitutive of a new accumulation strategy, one that enriched banks and real estate owners while compressing labor and gutting fiscal revenues, particularly those directed towards social protection. Collectively, this cemented what Miranda Joseph calls a ‘debt society.\’
Indeed, over the course of thirty years, public debt became one of the pillars upon which Lebanon’s political economy consolidated. When Riad Salameh replaced lawyerly technocrats as BDL governor in 1993 – having previously served as Hariri’s Merrill Lynch portfolio manager – the central bank’s role transformed into that of an enabler of financial extraction rather than a steward of stability. Thereafter, debt was issued primarily as a means for extracting labor’s surplus and handing it to capital. In conjunction with a handful of other regressive reforms – the scrapping of progressive income taxes, slashing of the corporate tax rate to 10%, exemption of interest and real-estate income from taxation, lowering of customs duties, and wage repression – the result was spiking inequality. Between 2005 and 2016, Lebanon’s top 10% of earners captured over 50% of national income, while the bottom half earned just 12–14%.5
In terms of mechanics, the debt-lubricated political economy overseen by Riad Salameh worked as follows. Lebanon’s commercial banks, owned by the same warlords who took over the state after the war, supplied the state with cash by purchasing Treasury Bonds. As these bonds came with high interest rates attached, the commercial banks in question could rake in gargantuan profits. Flipside of the same coin, the state’s ever increasing borrowing costs pushed the public debt stock higher and higher. Even the introduction of a value-added tax in 2002 — the quintessential regressive tax — failed to plug Lebanon’s growing fiscal deficit. The state’s (designedly) shaky fiscal footing required that new debts constantly be issued just to cover the borrowing costs on the old ones. Expanding debt to GDP ratios justified paying larger coupon rates to cover investor “risk”. Rinse, repeat: the sovereign obligations became a device for perpetually filling the coffers of Lebanon’s financiers.
Outside the treasuries market, commercial banks were also allowed to hand out loans with little oversight from the central bank. This was much to the delight of the politically-connected car importing cartel and travel agencies promoting holiday packages to Turkey, to name a few. Borrower risk was of no concern. After all, the public debt channel kept profit margins high and shareholders happy, the very same shareholders who were simultaneously responsible for the country’s ever deteriorating public finances.
All along, the conditions for crisis were being laid. The BdL’s core policy was funneling dollar flows into the country’s commercial banks via treasury issuance and the payment of high interest rates on the USD-denominated deposits that the banks held at the BdL. As the rates the BdL paid on deposits exceeded those it could earn on capital deployed or deposited abroad, the central bank began running up sustained losses starting in the early 2000s.6 Ultimately, this pushed the BdL’s net reserves into the negative. Instead of addressing this balance sheet ‘crisis,’ however, the BdL responded in mid-2016 with a complex financial engineering operation aimed at replenishing foreign currency reserves and shoring up confidence in the banking system.
According to official reporting, at a time when FX reserves had dropped by $3.9 billion year-on-year (reaching around $35 billion in May 2016), BdL launched a series of circular transactions. It purchased $2 billion in newly issued Eurobonds from the Ministry of Finance, swapped Lira-denominated government debt to acquire them, and then sold Eurobonds and FX-denominated certificates of deposit (CDs) worth around $13 billion to the country’s commercial banks.7 To encourage bank participation, BdL offered an unusually attractive arrangement: banks were allowed to discount an equivalent amount of Lira-denominated treasury bills and CDs at a zero-percent rate, instantly realizing profits that were split evenly with BdL. This operation did not occur in isolation. BdL’s strategy, developed amid sustained balance of payments deficits, declining FX reserves, and a slowdown in non-resident bank deposits, also included a broader set of transactions. Saliently, the central bank issued $12.5 billion in new USD-denominated CDs by the end of 2016, which banks financed by repatriating offshore liquidity and attracting new foreign currency deposits, often through high-interest offers to wealthy clients, thus bulking up BdL’s FX reserves while containing the deficit in balance of payments that year.8 The BdL then repurchased the equivalent amount in Lira-denominated treasuries from the banks at a zero discount rate, allowing financial institutions to realize rapid profits with virtually no risk exposure. The initial rounds of this scheme generated approximately $3 billion in FX inflows and $2 billion in profit, according to BDL Governor Riad Salameh’s remarks at the July 2016 Emigrants Economy Conference.9 Though the commercial banks claimed the operations were aimed at meeting upcoming IFRS9 compliance requirements and strengthening capital buffers, the financial engineering scheme was quietly extended for another month, eventually netting BDL $7 billion in foreign currency and leaving banks with more than $2 billion in gains.10 By year’s end, BdL’s FX reserves rose to $34 billion – an 11.4% increase over 2015 – but this came at the cost of increased FX liabilities and unsustainable carry costs.11
Nor did the effects of public financial chicanery end there. The BdL’s operations also unleashed a flood of excess Lira liquidity into the banking system. Banks, suddenly flush with local currency that had limited utility outside Lebanon, faced growing difficulty in managing this glut. To absorb the surplus, the BdL introduced long-term Lira deposit instruments – maturing in five years or more – offered at slightly below-market interest rates. Participation required that 14% of any placement be allocated into 5-year, 5% government bonds, effectively channeling idle liquidity back into state financing. At the same time, the BdL urged banks to expand domestic Lira lending, despite the deteriorating economic outlook. Efforts to neutralize this liquidity were so urgent that the BdL reportedly pressured the Ministry of Finance to issue new Lira-denominated bonds with maturities ranging from 10 to 30 years – which the Ministry ultimately did – even though the government’s own account at the central bank had a surplus exceeding 11,000 billion LBP. Then-finance minister Ali Hassan Khalil struggled to publicly justify the new issuance, as it was unrelated to budget financing needs and clearly designed to soak up the excess liquidity created by the central bank itself. As a result, Lebanon’s public debt stock and debt servicing obligations bloated even further, while commercial banks pocketed extraordinary short-term profits.
By mid-2016, the BdL held 45% of all Lira-denominated treasury bonds, up from 22.5% in 2012.12. The central bank’s growing dominance as the state’s primary creditor drew repeated warnings from the IMF, which criticized the BdL for overstepping its monetary mandate and engaging in de facto fiscal financing. Yet the central bank pressed ahead, not only continuing to purchase government-issued treasuries, but also issuing its own high-yield certificates of deposit (CDs) in both Lira and dollars, offering returns that exceeded those of the treasuries in question. Banks, in turn, could earn more from BdL\’s CDs than from ordinary government debt instruments, while the BdL silently absorbed the resulting losses on its balance sheet. This allowed the true cost of public debt to remain off-budget and largely invisible in official state accounts. Over time, the maneuver ceased to function as a temporary buffer and became a structural feature of Lebanon’s speculative financial architecture.
Even more troubling, these operations stretched and arguably violated Lebanon’s Code of Money and Credit.13 Bypassing such procedures, the BdL operated in a legal grey zone to prop up an increasingly untenable model – one that relied on constant dollar inflows to finance public debt, plug external deficits, and maintain the illusion of currency stability. In this system, banks became the privileged conduits for hard currency. As a result, monetary policy became a vehicle for political quietude and financial extraction. The deeper concern raised by critics was not only that this model was unsustainable, but that it had no internal logic of self-correction – only repetition – raising the urgent question of when it would collapse, and who would ultimately bear its costs.
Not Redistribution, but Pathological Extraction
This speculative edifice not only produced artificial liquidity and short-term profits for banks, but also facilitated a staggering, largely unexamined redistribution of financial obligations when the financial system finally did give way in late 2019. To get a sense for scale, consider that between 2019 and 2024, the total value of outstanding bank loans fell from $55.5 billion to just $7 billion- a vanishing act of $48.5 billion from private sector balance sheets.14 While this process might appear as broad-based debt relief, the mechanism was anything but equitable. Dollar-denominated loans were overwhelmingly repaid in Lebanese pounds at artificially maintained exchange rates – at the official peg of 1,507.5 – long after the market rate had disintegrated. This loophole, paired with widespread use of “check trading” (where bad-faith actors purchased foreign currency deposits at discounts of up to 85%), enabled borrowers to essentially cancel debts at a fraction of their value.
Critically, this was not a populist form of relief. On the eve of the lending freeze in 2018, 1.3% of borrowers held nearly 69% of all loans; within that, a mere 0.2% (1,433 borrowers) controlled almost half of the total lending volume, averaging $23.8 million each. The borrowers therefore did not represent ordinary households with car or housing loans, but politically-connected merchants, real estate developers, industrialists, and contractors – sectors historically closest to the ruling elite and most entangled in Lebanon’s clientelist economy. According to central bank data obtained by Sifr Magazine, four categories of actors – traders, developers, real estate dealers, and industrialists – accounted for 57.5% (or $27.5 billion) of the loans erased between 2017 and 2023. What took place was not simply a devaluation-led restructuring; it was elite deleveraging at scale facilitated by a notable concentration of loans.15 Lebanon’s commercial elite, who had already benefited from subsidized interest rates and privileged access to credit, emerged with cleaner balance sheets, their debts effectively neutralized through a financial environment engineered in their favor. Meanwhile, the costs of this quiet amnesty – hyperinflation, currency collapse, and eroded savings – were externalized onto the broader public.
The banking collapse, far from being a universal disaster, thus doubled as a mechanism of class consolidation, transferring value upward through a macroeconomic structure designed to privilege borrowers at the top. The upper crust of society in turn accumulated more wealth, mainly through real estate or by being shareholders in joint-stock or holding companies tied to the ruling elites and their cronies. The companies in question were typically engaged in the few sectors raking in profits amidst the crisis such as construction, tourism and services. The regressive tax system helped in wealth accumulation, too. Lebanon’s mountains, the forests, the coasts and other public lands had to be sacrificed on the altar of profit, while nobody would manage the externalities generated by these sacrifices, such as ever-growing cancer rates due to unabated pollution.16
Cascades of Collapse
As mentioned, Rafiq Hariri’s former personal banker at Merril Lynch, Riad Salemeh, was transposed to the helm of the Banque du Liban in 1993 just as the country was embarking on its post-war reconstruction. Salameh would oversee the whole operation just discussed and make a few millions for his troubles via European real estate. Salameh’s signature move, the currency peg, ensured the traumatized masses’ docility through conspicuous consumption of all things imported. Westerners were entranced by this land of paradoxes, where political violence, systemic corruption, and joie de vivre coexisted; where ‘tradition’ met ‘modernity’ – regardless of what these two categories signify. Expatriates didn’t help by fuelling these tired cliches, both figuratively and in a material sense.
But this couldn’t last.
On the eve of the multifaceted meltdown in August 2019, when the Lira began to devalue for the first time since 1997, the Lebanese political, economic, and financial life had degraded into the preserve of Hawi’s monstrous darwish.
In the early days, as the Lira was in freefall and households’ purchasing power was rapidly plummeting, the Banque du Liban’s governor, in full impudence, said “tomorrow they’ll get used to it.”17 In other words, the Lebanese will have to accept the fact that their purchasing power will decline dramatically and that their life savings have evaporated as their dollar accounts became nothing but digits on a screen.
Today, the country is officially on auto-pilot, plunging further into the socioeconomic abyss – a plunge no doubt greatly accelerated by Israel’s genocidal rampage across Lebanon, one only upended by the ongoing carnage in Gaza. The situation is so dire that even the World Bank and the International Monetary Fund – two institutions synonymous with suffering across the Global South – are now seen as forces of salvation, with the former helpfully informing us that that latest bout of lopsided violence left a US$14 billion hole, of which approximately $6.8 billion was in damage to physical assets – including $4.6 billion for housing alone.18
The country’s mega crisis, as economic journalist Mohammad Zbeeb posits, threatens to squander an entire generation. Attesting to this, Lebanon’s GDP per capita in 2020 dropped back to the level of 1994. The collapse of the banking sector has qualitatively and quantitatively ripped through social life, with many families being stripped of private savings accumulated over three decades.
In the face of chaos, the ruling class has adopted ad-hoc contractionary policies. Critical was the weaponization of inflation. It has been used to absorb financial sector losses and to reduce the balance of trade by limiting consumption and import spending. As socioeconomic disparities reach harrowing levels and as widespread poverty becomes the norm for the majority, Salameh’s words from late 2019 have taken on the trappings of prescience. Social media feeds continue to be filled with the Lebanese joie de vivre, and expatriates continue to flood the country during the holiday seasons and act as if Lebanon hasn’t been facing a catastrophic collapse in living standards for the past six years. Normal life continues.
The Specter of Recovery
Yet, there are some signs that can offer a glimmer, a minuscule speck of optimism – or ‘pessoptimism,’ to borrow the memorable amalgam from the late Emile Habibi’s novel, ‘The Secret Life of Saeed: The Pessoptimist.’19
Against all odds, the eternal governor of the Banque du Liban’s fourth term ended in July 2023 without being renewed – a stark fall from grace considering that in 2017, his term renewal was unanimously validated by all of Lebanon’s political class (and that the Americans pushed him for the Presidency in the late 2000s, as Wikileaks revealed). In a phantasmagorical twist, Salameh was arrested by Lebanese authorities in September 2024 under the charge of embezzlement and is ostensibly still in jail as we speak. Who would have ever imagined that a man once the most untouchable of the untouchable, a man once widely admired for maintaining a robust degree of macrofinancial stability amidst unprecedented upheavals, could end up in such a discredited and sorry state?
Can we take Salameh’s fall as an indicator that Lebanon’s bevy of standard and recently-passed anti-corruption laws will finally find a friendly ear in the country’s notoriously politicized judiciary? The reformed public procurement law – itself the outcome of an admirable and laborious years-long advocacy and research effort by committed luminaries – is seemingly being well implemented (if we are to trust the website of the newly established Public Procurement Authority and the large suite of tenders presently up for grabs). For its part, the recently established National Anti-Corruption Commission even has a website and a published annual report – no mean feats for the Lebanese public sector.
And that’s not all. In October 2024, while the country was relentlessly pummeled by Israel’s unlimited supply of Western-procured arms, the Financial Times reported that the value of Lebanon’s “practically worthless US dollar bonds” started going up, with investors betting that the weakening of Hezbollah might pave the way for an orderly public debt restructuring and a long-awaited IMF-flavored reform package.20 An auspicious turn of events for the likes of Goldman Sachs and BlackRock to say the least, who one can assume took a punt on Lebanon’s discounted bonds during the onset of the financial crisis. 21 Solidere’s shares are presently reaching unprecedented heights, too, far beyond the previous peaks reached in the late 2000s when petrodollars from the Gulf were still flowing to the country.
Speaking of the Gulf, there has been no shortage of intra-Arab diplomatic activity over Lebanon’s northeastern border. Ever since the butcher of Damascus fled the country upon his army’s disintegration, putting a formal end to more than half a century of brutal Baathist suffocation and pillaging which could only make other Arab potentates blush, Arab delegations have been pushing to reestablish cordial relations with the new powers in Syria, lest the ghosts of the Muslim Brotherhood rear their heads again and pose a threat, real or imagined, to the sheikhdoms of Arabia.
Syria’s fate is too early to decide, not least due to Israel’s aspirations for lands beyond the Golan Heights, Turkey’s geopolitical ambitions, and the American presence in the oil fields of the northeast. Regardless, it strikes as unlikely that the country’s return to the Arab fold, co-extensive with the weakening of the so-called Axis of Resistance, might precipitate an influx of Gulf capital into Lebanon. Indeed, at this stage, it is unclear what interest Abu Dhabi and Riyadh’s sovereign wealth managers even retain in the one-time financial capital of the Arab world. Mohammed bin Salman’s Public Investment Fund is more preoccupied with diversifying the Saudi economy and weaning it off from its terminal addiction to Saudi Aramco’s revenues, while the Al Nahyan family’s ADQ is reaping the fruits of the Abraham Accords with its growing stakes in the Israeli economy. More broadly, the days of wealthy Gulf nationals and princes vacationing in the mountains and gambling at the Casino du Liban are far in the rearview mirror, with Lebanon long having lost its lustre and its raison d’etre as an East-West entrepot in the Gulf’s eyes. Besides, who needs Lebanon’s banking secrecy when Dubai is available? And who needs mountains torn asunder by unregulated and politically-connected quarries when state-promoted domestic tourism in Arabia is en vogue, courtesy of bin Salman’s Vision 2030 and the legions of public relations consultants creating a sector from scratch?
The ‘Third Republic’ and the Afterlife of Crisis: Reclaiming Lebanon’s Future from Its Past
Over more than a half-decade, the gruesome underbelly of Lebanese capitalism has been on full display. Nor has Lebanon’s malaise commenced with the recent financial crisis. In truth, these are lands long since presided over by Hawi’s darwish.
With Israel’s bombardments only adding fuel and bodies to the fire, it is clear that a reckoning with the country’s political and economic state of affairs can no longer be avoided. The last such attempt, brought on by the spontaneous uprising on October 17, 2019, quickly dissipated as the very real anger on the streets was redirected into unthreatening parades by sectarian warlords and their devious schemes. Perhaps a more fruitful path could lie in a stepping stone approach. In methodically and purposefully building on efforts to usher in genuine positive changes to the public sector – such as the aforementioned reformed public procurement law and the long process that brought it about – there could be an opportunity to move the country toward social justice.
As Lebanon navigates a multifaceted collapse made magnitudes worse by Israel’s invasion, a question raised in a 2006 cable published by Wikileaks again begs asking: Could the intensity of crisis have pushed Lebanon to the cusp of a “Third Republic”? Might the breakdown of the status quo open the door to more effective governance and less entrenched political venality?
Counted amongst the supporters of a Third Republic is Lebanon’s current Prime Minister, Nawaf Salam. In his 2021 book, the one-time President of the Court of International Justice proposed a structural rethinking of the Lebanese state, one that moves beyond the sectarian bargain and toward a more equitable, accountable, and inclusive political order. Executing such a transformation, alas, is no simple undertaking. Endowments of power in Lebanon are deeply entrenched. From the early liberal experiment championed by ideologues like Chiha to the postwar reconstruction led by Hariri to the more recent cycles of financial engineering and collapse, each phase of the country’s contemporary history has reinforced a system that privileges short-term capital gains, private accumulation, and elite consolidation. Rather than heralding institutional transformation, the post-2019 period revealed the resilience of a model that converts crisis into opportunity – at least for some – while leaving structural inequalities unaddressed.
But if history defines the conditions for present struggles, it does not decide their outcomes. And the struggle must now indeed be for a Third Republic. Moving toward that future will require more than technocratic fixes and donor-driven reforms. It will demand a new political economy rooted in redistribution, transparency, and public accountability – a reimagining not just of governance, but of the social contract itself. Whether such a shift can emerge from the ruins of today remains uncertain. But in a context where the old order has lost its coherence and credibility, the very act of asking what a “Third Republic” might entail – what it must break with, what it must build – becomes a critical space for thought and political possibility.
This publication has been supported by the Rosa-Luxemburg-Stiftung. The positions expressed herein do not necessarily reflect the views of Rosa-Luxemburg-Stiftung.
Photo Credit: Craig Finlay, “Abandoned Beirut Mansion: The Former Prime Minister\’s Bookshelf”
1 In 2000, ‘The Man with the Golden Soles,’ a documentary by Syrian filmmaker Omar Amiralay, was released. Intended to be a series of polite exchanges and debates between the critical filmmaker and Al Hariri, the documentary instead presents the latter – then in the ranks of the governmental opposition – in a relatively positive light. The hagiographic film was routinely broadcast on Hariri’s Future TV across the years.
2‘Al bahhar wal darwish’ is the first poem in Hawi’s Nahr al-Ramad, his first book of poetry released in 1957.
3Mohammad Zbib, “الدولة البائسة في أوضح صورها”, الأخبار, May 23, 2018. https://www.al-akhbar.com/Community/250607
4Alain Bifani, “The Origin of the Crisis in the Lebanese Banking Sector,” Hoover Institution, 2021. https://www.hoover.org/sites/default/files/research/docs/bifani_webreadypdf.pdf
5Lydia Assouad, “Lebanon’s Political Economy: From Predatory to Self-Devouring,” Malcolm H. Kerr Carnegie Middle East Center, January 14, 2021.
6Toufic Gaspard, “Financial Crisis in Lebanon,” Policy Paper Nº12, Maison du Futur & Konrad Adenauer Stiftung, August 2017.https://www.kas.de/documents/252038/253252/7_dokument_dok_pdf_49929_2.pdf/e5f3af4a-3bfb-0b46-dabd-1807ea9e7b34?version=1.0&t=1539648676814
7Toufic Gaspard, “Financial Crisis in Lebanon,” Policy Paper Nº12, Maison du Futur & Konrad Adenauer Stiftung, August 2017.https://www.kas.de/documents/252038/253252/7_dokument_dok_pdf_49929_2.pdf/e5f3af4a-3bfb-0b46-dabd-1807ea9e7b34?version=1.0&t=1539648676814
8Byblos Bank. “The Lebanese Economy in 2016,” 2016. https://byblos.byblosbank.com/files/Library/Assets/Gallery/Publications/TheLebaneseEconomy/Overview%20and%20Performance%20of%20The%20Lebanese%20Economy%20in2016.pdf
9Emigrants Economy Conference, 2016. https://www.youtube.com/watch?v=0XNj1_qJfVw
10Mohammed Wehbe, Al Akhbar, “Banque du Liban’s Gift to Banks Grows: $2 Billion in Immediate Profits” September 2016. https://www.al-akhbar.com/Community/218910/%D9%87%D8%AF%D9%8A%D8%A9-%D9%85%D8%B5%D8%B1%D9%81-%D9%84%D8%A8%D9%86%D8%A7%D9%86-%D9%84%D9%84%D9%85%D8%B5%D8%A7%D8%B1%D9%81-%D8%AA%D9%83%D8%A8%D8%B1–%D9%85%D9%84%D9%8A%D8%A7%D8%B1%D8%A7-%D8%AF%D9%88%D9%84%D8%A7%D8%B1-%D8%A3%D8%B1%D8%A8%D8%A7%D8%AD%D8%A7-%D9%81%D9%88%D8%B1%D9%8A%D8%A9
11Byblos Bank. “The Lebanese Economy in 2016,” 2016. https://byblos.byblosbank.com/files/Library/Assets/Gallery/Publications/TheLebaneseEconomy/Overview%20and%20Performance%20of%20The%20Lebanese%20Economy%20in2016.pdf
12Mohammad Wehbe, “Salameh Admits: We Gave the Banks $1 Billion”, Al-Akhbar, July 15, 2016. https://www.al-akhbar.com/Politics/216730
13InfoPro, Code of Money and Credit, http://data.infopro.com.lb/file/Code%20of%20Money%20and%20Credit.pdf
14ڤيڤيان عقيقي، «الرابحون من الانهيار في لبنان: المقترضون تخلّصوا من 48.5 مليار دولار من قروضهم»، صفر، 4 آذار 2025. https://alsifr.org/how-debtors-benefited-lebanese-crisis
15الأخبار، «0.4% من المدينين يستحوذون على 57% من الديون»، الأخبار، 17 حزيران 2019. https://www.al-akhbar.com/In_numbers/272007/0-4–%D9%85%D9%86-%D8%A7%D9%84%D9%85%D8%AF%D9%8A%D9%86%D9%8A%D9%86-%D9%8A%D8%B3%D8%AA%D8%AD%D9%88%D8%B0%D9%88%D9%86-%D8%B9%D9%84%D9%89-57–%D9%85%D9%86-%D8%A7%D9%84%D8%AF%D9%8A%D9%88%D9%86
16Hussein Mehdy. “In pollutant-clogged Beirut, rising cancer rates and younger patients.” L’Orient Today, March 6, 2025. https://today.lorientlejour.com/article/1370466/in-pollutant-clogged-beirut-rising-cancer-rates-and-younger-patients.html
17Ali Noureddine. “بكرا الناس بيتعوّدوا,” July 2021. https://www.megaphone.news/oped/%D8%A8%D9%83%D8%B1%D8%A7-%D8%A7%D9%84%D9%86%D8%A7%D8%B3-%D8%A8%D9%8A%D8%AA%D8%B9%D9%88%D8%AF%D9%88%D8%A7
18World Bank. “Lebanon’s Recovery and Reconstruction Needs Estimated at US$11 Billion” March 2025. https://www.worldbank.org/en/news/press-release/2025/03/07/lebanon-s-recovery-and-reconstruction-needs-estimated-at-us-11-billion#:~:text=Underpinning%20these%20needs%20estimates%2C%20the,costs%20reaching%20US%247.2%20billion.
19In Habibi’s 1974 tragicomic and satirical novel, the eponymous dimwitted protagonist recounts the tragedies he experienced in Israel as a survivor of the Nakba, including the loss of his family and being forced to work as an informant, while maintaining an optimistic outlook on life as his circumstances could always have been worse..
20Cotterill, J. and Jalabi, R. ‘Lebanon’s battered bonds defy deepening conflict to stage rally,’ Financial Times, October 10, 2024.
21BusinessNews. ‘Leurobonds up 35 percent,’ October 13, 2024.
‘, ‘post_title’ => ‘Turning a (Sinking) Ship: Prospects for Change to Lebanon\’s Political Economy’, ‘post_excerpt’ => ”, ‘post_status’ => ‘publish’, ‘comment_status’ => ‘closed’, ‘ping_status’ => ‘closed’, ‘post_password’ => ”, ‘post_name’ => ‘turning-a-sinking-ship-prospects-for-change-to-lebanons-political-economy’, ‘to_ping’ => ”, ‘pinged’ => ”, ‘post_modified’ => ‘2025-06-02 10:41:55’, ‘post_modified_gmt’ => ‘2025-06-02 08:41:55’, ‘post_content_filtered’ => ”, ‘post_parent’ => 0, ‘guid’ => ‘https://noria-research.com/mena/?p=762’, ‘menu_order’ => 0, ‘post_type’ => ‘post’, ‘post_mime_type’ => ”, ‘comment_count’ => ‘0’, ‘filter’ => ‘raw’, )Introduction
Since 2016, Egypt has aggressively implemented a range of austerity measures. Stipulated by conditionalities attached to IMF loans, these policies—ranging from subsidy cuts to public sector wage freezes—disproportionately harmed women. They did so by reducing women’s economic opportunities, increasing their unpaid care burdens, and worsening access to essential services. Seen in full, structural reform in Egypt, notionally designed to attract foreign investment and stabilize public finances, has in actuality deepened gendered inequalities and amplified vulnerabilities.
Austerity is not just a set of economic policies. It is a form of structural violence that systematically erodes women’s economic security and social well-being. The evidence shows that instead of fostering inclusive growth, austerity perpetuates exclusion. Pushing many into informal work, limiting financial independence, and threatening fundamental rights, it is a policy regime that expressly injures women.
Austerity After 2016
The policies introduced in Egypt after 2016 that have proven most damaging to women are five in number: (i) the elimination of fuel and food subsidies; (ii) public sector downsizing; (iii) the privatization of essential services; (iv) VAT increases, and (v) reduced social spending.
All of these policies were framed as necessary for economic stabilization. As the record shows, they made no such contribution: Egypt continues to loiter in and around financial crisis. Just as consequently, these policies worsened social inequalities.
Acutely reliant on subsidies for maintaining a baseline of household consumption, reforms on this front disproportionately affected working class women. Subsidy reforms’ effects on food prices proved especially pronounced. Due to shocks in commodities markets in 2020 and 2022, the lifting of subsidies would allow inflationary dynamics to take hold and perpetuate.
Already squeezed by losses in purchasing power, working class women also suffered worst from adjoining hikes in regressive taxes like the VAT and reduced social spending: Both policy changes served to sap disposable income further and remove what few protections working-class women had against employment disruptions.
Public sector downsizing, meanwhile, shut down those avenues in the labor market that had historically offered women a path out of precarity. The state’s hiring dropped precipitously after 2016, falling 45% as of 2022. Inasmuch as women had made up 40% of the public workforce, this left new labor market entrants with few good options (ILO 2022). Many dropped out of the labor force altogether. Many others were forced into informal employment with no social protections. Austerity policies in Egypt, much like deindustrialization in other MENA countries ultimately accelerated the defeminization of formal labor while intensifying women’s unpaid and undervalued reproductive labor.[1]
The privatization of essential services, lastly, shifted burdens related to healthcare, education, and childcare onto women of all socioeconomic statuses. The OECD estimates that Egyptian women now spend 7.5 hours per day on unpaid care work.[2] In practice, the state’s offloading of caregiving onto women would function to prevent a large share from even considering income-generating activities. Nor do the effects of privatization for women end there. The closure of public hospitals in rural areas in particular has created healthcare deserts while also elevating out-of-pocket expenses.
Each of these results gives testament to the World Bank and IMF’s recurring inability to address structural gender injustices. In Egypt as in so many other places, the two institutions force the poor, women most of all, to subsidize an unjust economic order.
Comparative Gendered Impacts of Austerity Measures
| Policy Measure | Women\’s Burden | Macroeconomic Effect |
| Subsidy cuts | 58% reduced food consumption | Inflation at 33% (2017) |
| Public sector wage freezes | 80% of health worker layoffs | Healthcare system collapse |
| VAT increases | 45% higher menstrual product costs | Regressive revenue collection |
The Austerity-Deindustrialization Nexus
There are second-order effects introduced by austerity that have also disproportionately harmed women. They prominently include austerity’s inducement of economic stagnation and stalling of Egypt’s industrial development. This is partially because both dynamics consolidated the labor market’s segmentation. With little growth being generated in the formal sector, the informal sector became the only game in town for women seeking work. The result is that 65% of all employed women in Egypt are now employed informally.[3] Standing little chance of transitioning into formal employment, these women serve as a reserve labor army of sorts—an easily exploitable pool of workers from which the economy can sustain a baseline level of profitability. Austerity-induced impacts on industrial development have also resulted in job losses that disproportionately affect women. This is quite clearly observed in Alexandria’s textile industry. Viewed comprehensively, then, austerity-driven deindustrialization can be seen to systematically undermine women’s economic agency and reinforce gendered vulnerabilities in the labor market.
Austerity, Patriarchy, and Feminist Alternatives
Materially, the IMF and World Bank’s interventions in Egypt, in privileging debt repayment above all else, buttress a patriarchal economic system. Per the joint UPR alternate report on economic and social rights in Egypt, these two institutions have, through their lending arrangements, contributed to increasing gender gaps in employment, education, and access to healthcare.[4]
The trajectory set by the Bretton Woods’ twins is neither the only nor best one that exists. A more viable way forward—a way that can both advance the cause of gender equality and secure Egypt’s economy—can be premised on the following policy recommendations.
Gender Responsive Fiscal Policies
The Egyptian state and its international partners must put a premium on allocating economic resources in a manner that prioritizes women’s access to quality healthcare, education, and childcare. These actors should also work to establish a progressive, income-based tax system that redistributes wealth toward marginalized communities, including low-income women. Furthermore, they should mandate gender-responsive budgeting in all government economic policies.
Resistance Neoliberal Prescriptions
Mindful of the gendered effects of public sector downsizing, policymakers must reverse the state’s retreat from the labor market and instead expand state employment opportunities. Policymakers need also implement wage parity measures to close gender pay gaps in the public sector (and more broadly). Beyond the public sector, industrial policy should incorporate gendered objectives. For instance, subsidies and procurement can be conditioned on firms employing a particular percentage of women.[5 In addition, basic labor protections must be strengthened for all workers, with special mind paid to the conditions of women in the formal and informal sectors.
Reinvesting in Public Services
In order to lessen women’s unpaid care burdens, policy makers must reverse austerity-driven cuts to public healthcare and education services. They should also expand subsidized childcare programs to facilitate women’s participation in the workforce, and improve public transportation infrastructure to enhance women’s mobility and economic access. In terms of scale, at least 5% of GDP in budgetary resources should be allocated to expanding childcare, eldercare, and healthcare services.
Ending the IMF\’s Exploitation of Women in the Global South
Lastly, a broader challenge to the IMF and World Bank modus operandi must be launched. Policymakers and allies in the international community need advocate for debt cancellation mechanisms that recognize the historical injustices faced by Global South economies. In the absence of some kind of debt restructuring, mobilizing the capital for essential social investments will be virtually impossible. Stakeholders should also work to anchor development plans in feminist alternative that center and value care work and the collective well-being above all.
Photo Attribution: Gigi Ibrahim, “Egyptian workers march to Shura Council on May Day 2013”: Openverse
[1] Yasmine Dildar (2024). “Gendered Impacts of Deindustrialization in MENA”, Policy Brief: Noria Research.
[2] Gaelle Ferant, Luca Maria Pesando, and Keiko Nowacka (2022). “Unpaid Care Work and Gender Inequality”, Report: OECD.
[3] Ragui Assaad and Caroline Krafft, “Introducing the Egypt Labor Market Panel Survey 2023”, Working Paper: Economic Research Forum (2023).
[4] MENAFem, Egyptian Front for Human Rights, Egyptian Commission for Rights and Freedoms, Tahrir Institute for Middle East Policy, Egypt Human Rights Forum, the CEWLA Foundation, “Joint stakeholder submission to the UN Human Right’s Council 4th Universal Periodic Review on Egypt”, Memorandum (2025).
[5] See the works of Stephanie Seguino for more on possible policy alternatives.
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