Three protesters hold a sign in Riad al-Solh Square that reads, “burn their mansions." Beirut. Lebanon. October 18, 2019. (Mohamad Cheblak/The Public Source)

Three protesters hold a sign in Riad al-Solh Square that reads, “burn their mansions." Beirut. Lebanon. October 18, 2019. (Mohamad Cheblak/The Public Source)

Workers' Solidarity, Redistribution, and Universal Social Protections... Slogans of a Struggle Against Engineered Losses

Nabil Abdo, Senior Policy Advisor for Oxfam in the Middle East and North Africa, leads the organization’s inequality advocacy work in the region. He is also a researcher and has focused on austerity policies, unions and labor movements in the MENA region, as well as informal economy, fiscal, and socio-economic policies. Our conversation was inspired by Oxfam’s 2020 report “For a Decade of Hope Not Austerity in the Middle East and North Africa" in which Oxfam collects and analyzes data on the growth of MENA billionaires’ wealth from March until August 2020 and the solutions to inequality that could have come of this wealth but did not. In our conversation, we discuss the roots of economic inequality, Lebanon’s post-war political economy, the economic and health impacts of the pandemic — particularly on women, migrant communities, and refugees — and social protection programs in Lebanon.

The following interview was conducted on February 5, 2021. It was edited and condensed for clarity by Sintia Issa.

I would like to begin our conversation by asking you about the root causes of wealth inequality in the region generally and Lebanon in particular. Oxfam’s report “For a Decade of Hope Not Austerity in the Middle East and North Africa” from last August revealed that since the start of the pandemic, MENA billionaires accrued $10 billion, while over 50 percent of the Lebanese population have sunk into poverty. Although this vast inequality may appear sudden, how would you explain its emergence?

In a sense, the rising inequality in Lebanon is chronic. It is embedded in the economy and how it was re-engineered in the post-war period. I think that what we are witnessing now is something that is supercharged and inevitable. While most countries, both in the developing world and in wealthier countries, were adopting a state-led development model based on social protection, Lebanon was a laissez-faire economy and a pioneer in the drive toward neoliberalism. The first reforms concerned taxes and exemplified tax reforms globally in the last 20 or 30 years, the idea of cutting down taxes to attract foreign investments and capital.

Between 1994 and 2010, tax revenues constituted 97 percent of debt service. The totality of taxpayers’ money went to repay debt, mostly to the banks.

Before the war, however, we had something akin to a progressive tax system with progressive taxation on corporate profit and a tax cut on income (income taxes). Then the reforms were implemented, reducing taxes on top income brackets while retaining progressivity for middle-and-lower income individuals. The result was a regressive, rather than progressive, tax burden that also spared real estate and interest income from taxation. But as taxes were drastically cut, the government still needed revenues to rebuild, and therefore, it turned to international markets to finance the reconstruction and received high-interest loans and bonds. Between 1994 and 2010, for example, tax revenues constituted 97 percent of debt service. Practically this means that the totality of taxpayers’ money went to repay debt, which means that most of this money went to the banks. Depleted of public revenues, the government funneled taxpayers’ money into the banks, raising their profits which were also untaxed. Alongside tax reforms, the ruling elite also destroyed what was left of manufacturing and other sectors of the real economy that produce goods and services. They deprived the country of the possibility to build the sort of infrastructure that supports a productive economy with real possibilities of job creation. Instead, the boom in real estate was actively encouraged, and even before the collapse, most of our workers had been in the informal sector. When you encourage financial sectors and real estate sectors — non-tradable sectors — you get inflation. So the prices in non-tradable sectors, like education, real estate, and health, keep going up, which means people start paying more for essential services. This was all a form of indirect impoverishment, and all of it was to maintain the peg.

 

Fig. 1: Annual Net Total Debt (in Billions of Liras)
Source: Karim Merhej/The Public Source. Data Aggregated from Banque du Liban.

What have been the overall economic and social impacts of the pandemic in Lebanon, especially on women, migrants, and refugees?

In a sense, the situation of refugees in relation to the virus in Lebanon is not unique. We all know that the pandemic spreads rapidly in crowded areas with limited infrastructure or clean water, and these conditions affect refugees in camps or settlements everywhere. We also know that many refugees face restrictions or are unable to afford decent housing. These factors severely impact infection and mortality rates in refugee communities generally and everywhere. In Lebanon, specifically, the problem is not the virus—or perhaps it is best to say that the virus is not the only problem — inequality is fundamental. The virus tends to spread in the context of inequality, and so refugees, among others, exist in this zone. The lockdown imposes restrictions on mobility, but this is especially true for refugees who already worry about stumbling upon internal security forces or having to stop at a checkpoint. There is also the question of lost income that comes with restricted mobility. Out of the refugees who have employment, most are engaged in the informal economy and get their wages daily, and with the lockdown they have lost vital income. Some are also dependent on aid from international organizations and agencies rather than systematic support from public institutions or the government, which adds other layers of inequality that do not exist for others. Then if you talk about the non-Lebanese in general, especially the migrant workers who fulfill low-paying jobs, they too are impacted. This includes, for instance, those who work in real-estate, a sector that was heavily hit in the pandemic in the context of the triple crisis.

The public sector is on the chopping board.
When it comes to women, we are seeing added care burdens, not only in terms of unpaid household labors, but also with home-schooling which is largely based on gendered divisions of labor. The Internal Security Forces has also revealed that there is an increase of gender-based violence, and the numbers made public probably do not represent the gravity of the situation as many women don’t report abuse. In the labor force, women represent 29 percent, a figure that is likely to change in the future with the rising unemployment due to the lockdown and the economic crisis. Indeed, if history is any measure of prediction, we know that in times of crises men are given priority of employment. Moreover, while women have been well represented in tourism and banking, these sectors were heavily hit in the pandemic (tourism) and the economic crisis (banking). It is also likely that the public sector will not be spared. The austerity that we are heading toward in the context of new loans will also intensify the crisis but also impact women in that sector. The latest budget and reform plans by the government previously revealed that the public sector is on the chopping board. This sector has always been many women's preferred route of employment because of the working hours and the protections that come with being a public employee, including job security, maternity, pension, social security, etc. Therefore, if austerity plans are implemented, women will be affected the most and we might see a drop in their participation in the labor force though this is still speculation.

Oxfam is calling for “a decade of hope not austerity in the Middle East and North Africa.” Knowing that the mechanisms you explained earlier are deeply entrenched within the governing political systems in the region, what would you say are some of the urgent economic measures and political transformations that governments in the region and Lebanon in particular ought to prioritize?

Austerity has played a role in the region. Governments and institutions like the IMF use the collapse of public revenues or endemic structural issues to justify it, supposedly to reach “sustainable” debt levels in the Global South, including the region. Revenues need to be raised, first to make debt sustainable and possible to pay back, then so the economy becomes larger than the debt accrued. In other words, austerity is essentially a set of policies based on cutting government spending and increasing public revenues to repay creditors. One of these policies concerns the taxation system. It’s important to look at taxes because they paint the best picture of a country’s political economy and allow us to see clearly the underlying power dynamics: who is losing, who is benefiting, and who is in charge. Taxes are decided by the central government, so they are decided in the domain of political economy. It is not just the market. Debt and tax decisions are made centrally by political parties and by power relations, and this is the crux of the issue in the region — taxes engineer economies. Through taxation, the government signals which sectors are unwanted, which should be contributing to economic development, and how redistribution occurs, especially through social spending to fund basic services. In response to austerity, governments in the region could have taxed wealth and implemented progressive taxation on corporations as an alternative source of revenue. But because of the prevailing political economy and the power dynamics within it, governments failed to push progressive tax reforms and instead focused on increasing indirect taxation such as VAT, decreased public spending on key sectors, such as education and health, and slashed subsidies. 

We have a significant amount of extremely wealthy people in Lebanon, and yet the government has always tried to squeeze water from a stone.

Second, governments should have provided universal social protection. Instead, through the IMF and the WB’s loan programs, they have been moving toward targeted social safety nets, which splits people into two categories: the poor and the non-poor. The assumption is the poor “deserve” social services and the non-poor can pay for what they need, as if there’s nothing in between. But it’s not about class; the IMF and WB have no class analysis in mind and don’t see the world as constituted of the bourgeoisie and the proletariat. In reality, however, there are the rich and the non-rich, not the poor and the non-poor, and the pandemic has really put in full view the importance of having universal social protection. In Lebanon, where you have a dual system of healthcare, privatized and public, you will always have a difference in quality. But when healthcare is public or nationalized that difference does not exist. So it’s a question of quality and equality. Third, debt is necessary to tackle because it can be extremely detrimental. This doesn’t apply to Lebanon only but everywhere else in the region. The fall of public revenues due to the lockdowns and the policies implemented during the pandemic is leading to a debt crisis. Governments should not generate revenue from people, even if it were only from the rich, to pay debt, which is what happened in Lebanon. We need the money raised for infrastructure and social services. In-and-of-itself, debt is not the issue because governments are the only agents in the economy who can spend more than they have to boost the economy. However, we are now in a situation where debt is being paid and repaid through austerity measures with the money of the people. This is regressive. There needs to be concerted action on debt to be able to move out of the austerity trap we are in. Fourth, there is the question of labor rights, freedom of association, and the right to organize. We already know that health and tax reforms are necessary but how will they be implemented if we cannot shift the power dynamics through organizing and collective action?

In spite of the long-engineered economic collapse that you discussed earlier, what would have been an effective and just governmental response to the health crisis, in the middle of the pandemic, and the Beirut port explosion, a violent outcome of negligence whose impacts were heaviest for the migrant and working-class communities living in the vicinity of the port?

In the region at large, austerity is typically what governs government response to crises. In Jordan, for example, funds are being taken from the Social Security Corporation’s maternity fund to finance cash transfers to the poor while the rich remain untouched. Meanwhile, government response to the pandemic and the Beirut blast has been almost nonexistent. It’s a tricky situation; the economy is collapsing in tandem. Still, the government could have done more. At Oxfam we found that had the government imposed a tax of 5 percent on net-wealth for those whose wealth is at least $5 million, the government would have been able to provide one million families with $300 monthly for a year, or the 300,000 families affected by the blast with $1000 monthly for a year. We have a significant amount of extremely wealthy people in Lebanon, so there are funds to be amassed, and yet, the government has always tried to squeeze water from a stone. Of course, there are technical details to address about a net-wealth tax but the issue is not technical — the issue is political. It’s a question of: where do we get the funds? Who should be paying for this?

The Central Bank’s operations have had one objective: buying time until a settlement is reached.
If the Central Bank's policies were engineered to serve development goals or objectives, like supporting families or supporting emergency crisis response, we would not have reached this point. Through different Central Bank mechanisms, the government could have provided temporary relief for families or temporary wage compensation for the affected. But the Central Bank’s operations have had one objective: buying time until a settlement is reached. And the World Bank is contributing to Lebanon’s debt issues. Instead of receiving a grant or making an arrangement of sorts, the government is taking yet another loan from the World Bank in order to create a targeted support program for families affected by the situation and the pandemic. These problems have been culminating and bubbling over the years, and now the pandemic and the collapse have constituted the perfect storm. Now, the government’s finances are collapsing and it has to address the needs of the people and respond to the pandemic at the same time. Anyhow, it’s not about “what ifs.” It’s about all the time that was lost; it’s about policy, monetary policies that have been engineered over the years to benefit the elite and most affluent at the expense of everyone else. And the response to the pandemic, despite the fact that it is appalling to witness, is not something out of the ordinary but part of a pattern we have seen over the years.

Why has Lebanon been unable to provide comprehensive social security and social protection? What are the consequences of this?

We have to consider how these programs were constituted and who is benefitting from them. Usually the most comprehensive social protection systems are public. Social Security systems benefit the formal wage workers, many (or most) of whom are men. Then there are targeted programs by the Ministry of Social Affairs, ad-hoc ones like by the Ministry of Health, and finally, forms of protections through non-governmental or sectarian organizations. In a sense, the structure of social protection in the country reflects the country’s political economy, as several factors have worked against universal social protection over the past decades.

When you place people under different regimes of protection, you create different solidarities and remediations, while breaking solidarity between workers.

First, the labor market and the economy’s structure have been changing since the seventies — I return to the 70s because that’s when the National Social Security Fund was established. Although the labor market kept changing, the labor law remained the same, neither informed by the unions’ perspectives and nor responsive to the need of adapting social security mechanisms to a changing labor market. We moved away from the model of formal labor by a male breadwinner or wage-earner toward widespread informality, recurring migrant workers with no coverage. Redistribution through confessionalism, instead of the state or taxes, is another factor. With these programs, you have non-state actors who, for example, are engaged with the Ministry of Social Affairs to provide relief or services to their own constituents. However, it is not the government that is directly delivering but it’s these programs with the Ministry of Social Affairs through clientelist networks. Hierarchy is also a factor. Public servants are at the top of the pyramid, followed by formal public and private sector workers, then the Lebanese who fall under neither category but benefit from the Ministry of Health’s programs, followed by the Lebanese who benefit from the Ministry of Social Affairs’ National Poverty Targeting Program, then the poorest who rely on clientelist or confessional systems, and finally migrant workers and refugees who get nothing from here and have to rely on international organizations. All of this breaks solidarity between people. We’ve seen it manifest in labor mobilizations, like the ones from a few years ago. When you place people under different regimes of protection, you immediately create different solidarities and types of remediations, while breaking solidarity between different groups of workers. Public sector workers’ mobilizations, for instance, have excluded informal or contractual workers, if not undermined their struggle. One could also say that this is one of the main purposes of these kinds of protection systems.

Fig. 2: Percentage of the Population Living Below the Poverty Line
Source: Karim Merhej/The Public Source. Data Aggregated based on figures by IRFED (1962), referenced in Gaspard (2004); Antoine Haddad/ESCWA (1996), referenced in Baumann (2016); UNDP (2008); World Bank (2016); ESCWA (2020). It is worth noting that the methodology used in these different studies is not uniform, and some are not clear whether non-Lebanese households are included.

How should we transform social security and social protection so it benefits more people widely?

In my opinion, we need to rethink the whole system and move toward universal social protection that inherently accommodates different programs. The ILO, for example, proposes social protection floors, meaning a basic minimum for everyone that increases with capacity and capability. It is also important to no longer link, or at least not exclusively, social protection and social security to formal wage labor. Having social protections should not be contingent on whether or not you have paid employment in a formal enterprise or work. This de-linking enables people to live decently, even when they are not working, even when they are out of jobs, even when the economy is bad. I also think it is really important for social movements and labor unions to have a vision of universal social protection. While labor unions are exclusively trying to defend social protections, which should be protected, it comes at the expense of trying to figure out systems that benefit everyone and create solidarity among people instead of competition. This perspective is crucial among unions, among workers, among social movements. When people are used to benefitting from a system for a long time, the reaction is always to defend it, without really thinking about how to move beyond it to have a system that benefits everyone. There’s no magic bullet for this. As long as we think of universal social protection systems that create solidarity between people and are embedded in a socioeconomic vision based on redistribution, we’d be on good footing. However, if we’re only thinking about how to put patches, that only the very poorest should get a chance to receive support, then we get a society where social protection is no longer a right but charity to be given to some and a privilege to be given to others, and this is not where you want to be.

Having social protections should not be contingent on formal employment. This de-linking enables people to live decently, even when they are not working, even when they are out of jobs, even when the economy is bad. Social movements and labor unions should have a vision of universal social protection.

With Lebanon’s financial reserves running out and lawmakers planning to partially lift subsidies for essentials, like medicine, fuel and food, the caretaker government has proposed a cash-assistance program for middle-to-low-income households paid for with WB loans — yet another targeting program. Is such a policy viable in the short or long term?

Cash assistance is an ad hoc solution. And because the cash assistance program is based on loans, it is not sustainable. Cash assistance is good if implemented widely. Otherwise, it’s a  patch. In a year or two, what will happen? This is what I’ve been seeing in Lebanon: we have these kinds of ad hoc programs, without any kind of universal framework binding them together. In the grand scheme of things, they’re sedatives and we will hit a wall and reach a point where we have to ask: “What do we do now? Do we take another loan?” Also, it’s always better if cash transfers are not conditional on certain behavior, like we usually have here. I don’t believe they are conditional this time around, but in many programs already implemented, cash transfers are conditional on children attending schools. Imposing conditions deprives people of their agency; it is based on the assumption that people don’t have the ability to decide for themselves what is good for them. When there are conditions, they mostly fall on women as women usually make sure that children attend school. Cash assistance programs should be part of a wider social protection system, and to be able to sustainably fund them, we need a fair tax system because you have to get the money from somewhere and you cannot keep asking the World Bank to lend to you. When we have this kind of tax system — a progressive and redistributive tax system — we would be able to implement cash assistance when they are parts and parcels of a universal social protection system that includes other benefits, such as unemployment benefits, old-age pension, child and family benefits, health protection and others.