The Platform

Shoppers in the old souk in Tripoli, Lebanon.

Politics can act as either a positive or negative force, shaping Lebanon’s developmental trajectory in significant ways.

In the complex realm of geopolitics, the role of politics often mirrors the dual nature of nuclear energy: it can be harnessed for peace or wielded as a force of disruption. The Middle East stands at a crossroads where the interplay between political dynamics and economic prospects shapes the region’s future. Recently, the region has seen promising developments in countries like Saudi Arabia, Qatar, the UAE, and Bahrain, contrasted starkly against the persistent challenges in Lebanon, Syria, Iraq, Iran, Yemen, and Palestine. This juxtaposition highlights the dual capacity of political actions to either drive economic growth or impede progress.

Market economies are inherently resilient and adaptable, equipped to navigate a variety of challenges and disruptions. Adam Smith’s famed “invisible hand” theory posits that in a laissez-faire environment, individual self-interest and competition might inadvertently steer economic activities toward collective benefits. However, the pervasive influence of politics on economic dynamics is unmistakable and profound.

The enduring debate between advocates of minimal government intervention and proponents of necessary governmental roles in the economy sparks extensive discourse. Politics can act as a catalyst, either by promoting the growth of the informal economy in environments marked by instability or by nurturing the formal economy in more stable contexts. Like water finding its path through cracks in the rock, the market economy adapts and fills the voids left by political uncertainties.

In Lebanon, political inertia has turned the country into an unlikely stage where the invisible hand of the market seems to have choreographed an elaborate dance of resource allocation and economic evolution. Here, the absence of significant government interference has unexpectedly allowed market forces to orchestrate a transformative journey, reshaping the economic landscape.

Additionally, Joseph Schumpeter’s concept of “creative destruction” is vividly illustrated as Lebanon experiences the closure of obsolete institutions and the emergence of innovative startups. This economic evolution, however, raises questions about whether this narrative might overlook the plight of displaced workers and the potential social upheaval stemming from unregulated market forces. The allure of laissez-faire economics confronts the practical need for governmental intervention in Lebanon’s economic saga.

While the ideals of laissez-faire economics shine with promise, the unfolding reality presents a complex tale of market imperfections and societal fractures that remain unaddressed. Understanding this dynamic is crucial for developing effective policies that promote economic resilience and prosperity, whether by navigating through the formal channels influenced by positive political energy or maneuvering through the informal pathways carved out by negative political energies.

The impact of political behavior on economic dynamics is substantial, especially where it manifests as disruptive. In such scenarios, the informal economy thrives, perpetuating a cycle of economic stagnation and underdevelopment. This situation presents multifaceted challenges: it dampens the economic potential as formal sectors struggle to compete with informal markets, fosters the proliferation of illegal employment and informal labor practices leading to exploitative working conditions and diminished worker rights, and contributes to the erosion of government revenues through tax evasion and the operation of economic activities outside regulatory frameworks.

In Lebanon, the roles of policymakers and business leaders are pivotal in shaping the economic and political landscape. Their decisions and actions have far-reaching implications for the nation’s developmental trajectory. Particularly in environments plagued by negative political energy, significant initiative from business leaders is required to maintain economic momentum. Fundamental shifts in governance and leadership are essential to transform political conduct from negative to positive energy, which is paramount for unlocking Lebanon’s full economic potential. In regions like Lebanon, Iraq, Syria, and Yemen, political leaders must prioritize reforms aimed at fostering positive political energy. Without such reforms, economic policies alone cannot tackle the underlying challenges.

It’s imperative to recognize that an economy will never reach its potential if encumbered by the negative energy of its political environment. Effective policy interventions must focus on promoting transparency and accountability in governance, upholding the rule of law to protect investors’ rights, fostering inclusive economic growth to bridge socio-economic disparities, and nurturing dialogue and cooperation among political stakeholders to resolve conflicts and enhance stability.

However, transforming the negative dynamics of the ruling political class into positive energy requires a comprehensive approach that extends beyond mere economic and governance reforms. This transformation necessitates a suite of political and social reforms, cultural shifts, international engagement, civil society empowerment, and robust leadership development.

Consider these initiatives: Implementing measures to enhance political transparency, accountability, and responsiveness to the population’s needs. This could include electoral reforms, improved voter participation measures, anti-corruption strategies, and bolstering democratic institutions.

Tackling social inequalities, promoting social cohesion, and ensuring equitable access to opportunities for all societal segments are critical. Investments in education, healthcare, and social welfare programs are vital for reducing societal grievances and building trust in the political system.

Promoting a culture of dialogue, tolerance, and inclusivity within the political class and society at large is essential. A shift away from zero-sum politics towards collaborative decision-making and compromise can substantially elevate political discourse.

Engaging with the international community and neighboring countries to promote regional stability and cooperation is crucial for conflict resolution. Building diplomatic bridges and seeking mutually beneficial partnerships can significantly reduce tensions and foster a positive geopolitical environment.

Empowering civil society organizations, media outlets, and grassroots movements to hold political leaders accountable and advocate for democratic values, human rights, and good governance is another pivotal area.

Investing in leadership development programs and initiatives to cultivate a new generation of ethical, service-oriented political leaders is crucial for sustained national development.

By addressing these broader dimensions alongside economic and governance reforms, it becomes feasible to shift the conduct of the ruling political class from a negative to a positive force for change and progress.

The consequences of negative political energy are starkly visible in troubled nations like Lebanon, where political dysfunction has precipitated an unprecedented economic crisis. The collapse of the banking sector, previously a pillar of stability, underscores the destructive power of political instability. In nations like Iraq, Syria, and Yemen, prolonged conflicts and governance challenges have perpetuated instability, impeding economic progress and worsening humanitarian crises.

To navigate these challenges, policy interventions must prioritize governance reforms aimed at enhancing transparency, accountability, and the rule of law. Strengthening institutions to safeguard investors’ rights, promote fair competition, and combat corruption is imperative. Inclusive economic growth initiatives that invest in education, healthcare, and infrastructure are essential to mitigate socio-economic disparities and promote economic inclusion. This enables citizens to not only meet basic subsistence needs but also to lead productive, fulfilled lives, making informed choices about their future.

Successful policy implementation demands concerted efforts from political leaders, civil society, and international partners. Sustainable change is a long-term endeavor requiring commitment, collaboration, and accountability at all levels. Mechanisms for monitoring progress and enforcing compliance with reforms are crucial to ensure the effectiveness and sustainability of interventions.

The intricate interplay between politics and economics in the Middle East profoundly affects economic outcomes. Politics can act as either a positive or negative force, shaping the region’s developmental trajectory in significant ways. While the market economy demonstrates resilience and adaptability, the overriding influence of politics cannot be underestimated. It can foster the growth of either formal or informal economies, contingent on its nature. Lebanon’s economic narrative poignantly illustrates the unintended consequences of laissez-faire economics amidst political inertia.

Moving forward, effective policy interventions must prioritize governance reforms, inclusive growth initiatives, and international cooperation to convert negative political conduct into a catalyst for change. By promoting transparency, accountability, and inclusivity, political leaders and stakeholders can forge environments conducive to economic resilience, prosperity, and stability in the Middle East. Despite the challenges, with a unified approach and resolute action, the region can surmount its obstacles and achieve a brighter future characterized by inclusive growth and enduring stability.

Mohammad Ibrahim Fheili is currently serving as an Executive in Residence with Suliman S. Olayan School of Business (OSB) at the American University of Beirut (AUB), a Risk Strategist, and Capacity Building Expert with focus on the financial sector. He has served in a number of financial institutions in the Levant region. He served as an advisor to the Union of Arab Banks, and the World Union of Arab Bankers on risk and capacity building. Mohammad taught economics, banking and risk management at Louisiana State University (LSU) - Baton Rouge, and the Lebanese American University (LAU) - Beirut. Mohammad received his university education at Louisiana State University, main campus in Baton Rouge, Louisiana.