Note: a discplined Hezbollah?

Last Saturday, Hassan Nasrallah Spoke at the holy “Qadr” night, his speech was as usual televised for the crowds assembling in the Southern Suburbs of Beirut.

It was very interesting to hear the head of one of most disciplined parties in Lebanon, urging his members and cadres to quit the “love for luxury”, calling for people to adopt belief in God within the least of measures by simple “fear of the end”, “Let us not believe like free men, this the sheikhs can do, let us believe like slaves (…) let us believe by fearing sin, and by wishing to be accepted in the heavens”.

A big portion of his speech was dedicated to describing in details the pain of hell, and the pains of the grave, while one waits for judgment day, and then at the end describing the heavens.

At one point in his speech he sais: “god gave us a good business deal, let us consider belief a good business deal and let us commit ourselves to the minimum of this deal, do good on earth and earn the heavens and avoid the torments of hell”

Nasrallah’s speech should not be taken as a simple, common rhetoric and call for stronger commitment to religion, but should be understood as a direct message to his party members, who based on several reports, have been parading with big Jeeps in the southern suburbs of Beirut.

A young 25 year old, whose family members are active members within Hezbollah, said to me: “My uncle’s home (Hezbollah members) have three GMCs, why do they need three? And who pays for their fuel, especially that it costs loads to fill it up”.

Responding to a question on how much does a full-timer earns in Hezbollah he said: “A single full-timer would get around 400 USD, while one with a family and children might reach 800 USD” and he adds “based on what close-family members of mine say there are around 30,000 full-timers in Hezbollah, and some of the Hezbollah full-timers have left the party because of low-pay”

Based on this testimony this makes the minimum monthly spending by Hezbollah on wages reach about 12 Million USD.

Ibrahim el Amine, a former leading figure in the Organization for Communist Action, wrote an article about a week ago in Al-Akhbar newspaper, where he criticizes Hezbollah, and he expresses his fears from a PLO-ization of Hezbollah, reminding about the bureaucratization of the Palestinian Liberation Organization and how it furthered itself more and more from people, which increased its weakness in gaining popularity and support as a resistance movement.

Currently many in the Southern Suburbs of Beirut are expressing their resentment through popular discourse, the important thing here is also to notice, that even if Nasrallah has interfered against this trend of “seeking luxury”, it would not be enough to halt such a thing, especially with the huge amounts of money the party is using in the purchase of land in South Lebanon and in Beirut, which is basically creating/or enforcing the economic power of certain “Donors” at the same time making the party more and more linked to big land owners and fast growing Shia’ bourgeoisie who is mainly concentrated within the construction sector of the economy.

Moreover, Hezbollah through his network of landowners, in the aftermath of the July 2006 war, has bought several damaged buildings in low prices, rebuilt them and now is selling them with higher prices, now a common place in the Southern Suburb of Beirut costs around 150,000 USD, while before 2006 it only cost around 60 to 70 Thousand US dollars.

Hezbollah Petit-bourgeois roots are appearing to the surface in a clearer way, and his successive non-defiance and establishing peace-treaties with March 14^th forces whom were publically accused of backing Israel in her war on Lebanon in July 2006, puts up some essential questions, like: is Hezbollah being absorbed by the ruling elite, and the whole fabric of relations of interests between imperialism and its local allies from the Lebanese and Arab bourgeoisie, basically is the scenario of the PLO being repeated again?

These questions are important because they have a great significance in understanding why national liberation movements have failed to accomplish "Liberation", and as socialists, it is an important fact for arguing for a permanent revolution in the Middle East.

Yet let us not be fooled into arguing against the resistance of Hezbollah against the Israeli forces, but actually quite the opposite, keeping our unconditional support for the resistance is an act of gaining support in our criticism against Hezbollah's petit-bourgeois character, and in showing its limitations in keeping resistance alive against imperialism.

the petit-bourgeoisie would turn with the bourgeoisie and against the workers, when their interests are being protested, like when Hezbollah adopted the March 14th (big bourgeoisie) decision to only elevate the minimum wage to 500,000 LBP (330$) and refusing the trade unions demands for 960,000 LBP (640$).

A growing real estate bubble in Lebanon

[picture taken from Al-Akhbar]

Rasha Abou Zaki from Al-Akhbar had written quite an interesting article about an undisputed possibility of a growing real estate bubble in Lebanon.

Abu Zaki reports: "According to financial sources, housing loans and mortgages are on the rise, it rose by 20.7% between 2006 and 2007, and between May 2007 and may 2008, it rose by 28.64%. Property prices in Beirut rose quite noticeably, between January 2008 and July 2008, estimates out the rise to be about 40%, where the average meter square price have reached about 1,500 USD. An official from Ramco Real Estate firm expects prices to keep rising and to reach 60% by the end of 2008. this price increase is pushing land-owners to reclaim their lands from the tenants and to sell them, benefiting from the price increase; All of that while the purchasing power of the majority of the population is still falling, which obviously signals a widening gap between housing prices and people's purchasing power, a strong indicator that the country might reach a real estate bubble"

What is an economic bubble?
Under capitalism, the economy responds to market needs, and not to social needs, i.e. profit margins are the main decisive character of economic investment and production. Such drive within capitalist economies drives it to be in constant crisis, uneven development between the economic sectors, shortages in production in some commodities, and over-production of other commodities. This weak and shaken balance of supply and demand renders the whole economy to plunge into different crisis’s, such as for example the real-estate bubble. A bubble develops when the price of a certain commodity develops to be much higher then the purchasing power of the population, thus the supply becomes inflated compared to market demand, for the market to adjust itself, the prices either have to be stabilized at a certain peak then drops dramatically, or the purchasing power has to increase, basically by having better and higher wages.

Yet as we all know the bourgeoisie is not usually keen on giving workers higher paycheques, so it becomes up to the workers to actually demand and force the bourgeoisie to pay higher wages, in the march of history, these bubbles and economic crisis’s will always occur, and that is why to be able to permanently get rid of such chaotic organization of the economy, capitalism has to be abolished.

The basic idea behind socialist’s critique of capitalist economy can be laid out in a very simple example, which I have read in one of Cliff’s books:
Under capitalism, Planning of production operates on a singular level, on the level of a certain company, but there is no planning of the economy in general so it si adapted to social needs, for example there is planning in production within General Motors, and there is planning in production within Mercedes Benz, but there is no planning in terms of production between both factories, rather, the relation that links both of them is a relation of competition and not a relation of co-operation. Under socialism, the economy responds to social needs and not of profit margins, thus production becomes social in its implementation and it’s planning as well.

Silk Industry in Lebanon 1800's till the first world war

Silk Workers 1880's (source: Shemali )

Extracts from the book: "Merchant Republic of Lebanon"

Lebanon's position in the nineteenth-century international market economy was shaped by the development of sericulture. While Lebanon had already begun to specialize in raw silk production by the eighteenth century, its econmic potential and effects were not realized until the next century when silk exports to France expanded rapidly
"..."
Rapid growth of output and export of Lebanese silk began in the mid nineteenth century, as suggested by the elevnfold increase of silk exports from beirut between 1841 and 1857. this trend peaked between 1873 and 1902 when production of raw silk in Lebanon and Syria increased by over 350%, due entirely to rising foreign (primarily French) demand. Moreover, the weight of silk products in total exports from Beirut's port doubled from about 25% at mid-century to 50% during the 1890's. Silk and cocoon output in Lebanon and Syria grew most rapidly from 1873 to 1915, when export dependence on France became almost complete: 40% of total silk exports were sent to France in 1873, growing to 99% in 1914. Just prior to the war, silk production comprised 73% of total value-added in agriculture and industry (cocoon production accounting for 55% and silk thread for 18%) and 36% of gross product in Mount Lebanon. At the same time, annual operating capital in Mount Lebanon's spinning factories was estimated at FF 9 million of domestic resources and another FF 8-9 million of foreign investment; domestic fixed capital comprised an additional FF 2.3 million and foreign fixed assets amounted to FF 0.2 million, making the industry a recipient of a large share of the total flows and stock of capital in the mountain. Most investment was financed internally: funds retained from net profits in silk reeling, 37% of total factor income being profits, were far higher than what was required for investment and current operations. Two final indicators of the economic importance that silk had attained in Mount Lebanon by the prewar years were that half of Mount Lebanon's population was economically dependent on sericulutre and that cocoons, silk thread and waste comprised 62% of total exports from Mount Lebanon

Public Debt in Lebanon

The development of Public Debt in Lebanon between 1970 and 2000,















Gross public debt growth development in lebanon (1970 - 2000)












Public Debt development as percentage of GDP in Lebanon


The public debt in Lebanon have reached extraordinary proportions counting to 40 billion USD, and it accounts to more than 160% of the GDP, most of the debt have been internalized through the Paris I, II, and III conventions where the majority of the debts have been bought by local Lebanese banks.

Debt Service:

The debt service is accumulated through:
Direct Taxes: count up to 40% of Tax revenues in Lebanon
- Tax on Commercial and Industrial Profits) starts at 4% for profits below 9 million LBP (6,000 USD) and surprisingly ends at 21% for all profits starting from 69,000 USD to infinity, meaning an industry generating 500 million USD per year will pay the same percentage of profit as a company generation 70,000 USD per year.

- Income Tax: payed at source and applied on waged labour, the tax ranges between 2% and 20%, depending on the declared income per year.

- Financial Transactions Tax: this tax is collected through the transfer of wealth from one party to another, although, when Prime Minister Hariri got assasinated, the government freezed this tax for few days, so that hariri's welath could be transfered to his children without having to pay any taxes!

Value Added Tax: counts alone to 36% of tax revenues in Lebanon
the Value added tax is currently 10% with speculations from the government and its godfathers and godmothers (IMF, World Bank, International Community) that it will be increased to reach 16% than 18% and 21%, this tax is one of the main revenues of the government and it has a devestating effect on waged labourers and especially workers.
The main problem with this tax is that expenditure is nor proportional to income, thus the tax is more harmful to low-income families, where as the government propaganda states that the VAT tax is an egalitarian TAX!! bullshit.

A family (A) who has an average income per month of 800 USD spends approximately 400 USD on supplies and pays around 40 USD as VAT, now 40 USD is about 5% of this family's income.

While another family (B) having an average income of 10,000 USD and spends 3,000 USD per month on supplies would only have to pay 300 USD as VAT accounting for only 3% of the family's income.

In conclusion Family A earning 92% less than another family B, is paying 40% more in indirect taxes compared to their appropriate incomes.

Customs accounting to 22% of Tax revenues


Now the debt service is payed through the collection of the above mentioned taxes, yet with the debt being internalized, these tax revenues are being payed directly to Lebanese Bank Owners who funny enough are the same that are in government, at the same time the government is still refusing to imposed any progressive direct taxation on wealth, since if applied it will be taking money out of the wealthy!! god forbid!!

so the cycle continues looting money out of the pockets of the poor, giving them to bank owners (the financial bourgoisie), and during that time the bank owners are accumulating more and more profit, because also the accumulation of tax revenues are still lower than the the yearly debt service which is still on the rise due to extraordinary rates.

actually we can easily say today, that the lebanese state is no more than a Joint Stock Company where the majority of Shares are owned by Local Banks and the International Financial Market

Debt and More Debt: Debtor's Prison - LCPS 1996

The Lebanese Center for Policy Studies released a report back in 1996 about the general implication of the Public Debt on the Public Sector and the Economy in General, the document gives a good overview on the debt crisis in Lebanon

* This article is drawn from a project on Lebanese fiscal policy funded by the International Center for Economic Growth (ICEG) and the Center for International Private Enterprise (CIPE).

The latest figures put Lebanon¹s gross public debt at $7.6bn, up from $6.7bn in June 1995. Gross public debt as a share of GDP increased from 70% to 76% during the same period, assuming a current GDP of approximately $10bn. This ratio, however, should be taken with a spoonful of salt since there are no accurate figures for Lebanon¹s GDP. There are, instead, many ³interpretations,² the result of an interesting mix of educated guesswork and politics. As someone once said, Lebanese economic data is a matter of opinion, not of fact.

In spite of the paucity of reliable national economic data, it is clear that the public debt has reached dangerous proportions. One need only look at the following figures:

The debt burden is growing and is likely to slow down the economy. The ratio between the net public debt and GDP has increased from 34.4% in 1993, to 44.4% in 1994, and to 51.5% in 1995. Assuming a real GDP growth rate of 8% in 1996, this ratio will jump to 58.6%.[1]

The burden of the debt on the budget is growing at an alarming rate, reducing the government¹s ability to devote more resources to investment or much needed social programs. In 1992, 16.8% of the budget went to payment of interest and principal on the internal and external debts. In 1993, this ratio jumped to 30.4%, to 23.5% in 1994, to 28.6% in 1995, and is budgeted to go up to 40.3% in 1996.[2]

It is becoming more and more difficult for the government to service the public debt because it is accumulating faster than revenues are increasing. Debt servicing, which consumed 16.2% and 40% of actual government revenues in 1993 and 1994, respectively, is estimated to have consumed 72.3% of revenues in 1995. This is a particularly alarming statistic because it indicates the growing difficulty the government is facing in controlling the debt. By comparison, Jordan, which has a much higher net public debt to GDP ratio than Lebanon ­ 101% compared to 51.5% for 1995 ­ spends about 20% of its government revenues on debt servicing.[3]

Finally, because the government is unable to service its debt from revenues, it is currently borrowing merely to cover its debt servicing obligations. In 1994, the stock of net public debt grew by L£1,688bn while debt servicing totaled L£1,595.6bn. This meant that 95% of new debt in 1994 went to pay the interest on the old debt . In 1995, the stock of net public debt grew by L£4,660bn while debt servicing reached L£2,278bn; this meant that 49% of the new debt in 1995 went to repay the interest on the old debt. In 1996, 89% of the new debt is projected to go towards repaying interest and principal on the old debt.[4]

The Lebanese economy is caught between a rock and a hard place. Reconstruction cannot be sustained without borrowing to finance at least part of the public investment program. Although there is nothing inherently wrong with borrowing, borrowed money has to be put to productive uses: it must generate enough revenues for the borrower - in this case the Lebanese state - to meet its obligations in a timely fashion. Public sector borrowing, however, leads to a crowding out of private investment as well as a redistribution of wealth in two different ways: first, it leads to a further concentration of wealth because of a greater return on capital through higher interest rates; this is to the benefit of owners of capital who thus effectively benefit from a transfer of taxpayers' money. Second, it leads to a redistribution of wealth from future generations to current generations. Both effects have to be contained and countered by wise fiscal and monetary policies.

A great deal more also needs to be done. The first thing is to get the budget deficit under control by cutting non-investment items, including reducing the public-sector wage bill. This can only be done in the context of far-reaching administrative reform which is long overdue. Second, the government has to better manage its debt and must seek lower-cost financing and longer-maturities. Multilateral institutions and public creditors, such as foreign development agencies, offer much better terms than the Euromarket which Lebanon has already tapped twice in the past two years. Third, the government must develop a new strategy for the financing of reconstruction, one which sets investment priorities by order of economic urgency ­ investments which eliminate bottlenecks ­ and by revenue-generation. This strategy should provide a more explicit role for the private sector and privatization, preceded by the development of a public regulatory capacity.

Note

1. Debt figures are taken from the Banque du Liban bulletins.

2. Budget figures are taken from the finance ministry. The Debt Service item in the 1992-1995 budgets has been revised to make it consistent with the definition of Debt Service in the 1996 Budget.

3. For 1993 and 1994, the figures are for actual revenues and actual debt service. For 1995, the figures are estimates, not actual figures.

4. The stock of net public debt is projected to grow to L£11,869.5bn and the debt service item on the budget is budgeted at L£2,600bn (in current L£).

Imports to Lebanon

Source: Central Administration for Statistics, Lebanon

This graph shows the amount of imports to Lebanon by foreign countries, the weird is that most of the imports in Lebanon are from Europe (this means in Euro) while the lebanese pound is stabilized to the US dollar (1 USD = 1,500 LBP) this stabilization is having a disastrous impact on the lebanese market and the purchasing power, especially since the US dollar is falling behind compared to Euro.

In addition if the market fluctuations in europe are quite high this would have a direct impact on the market in Lebanon, and would have actually a double impact due to the stabilization policies in Lebanon

Imports Vs Exports in Lebanon

We can see clearly here the deficit between Imports and Exports in Lebanon, the deficit ranging between 94% in year 2000 and about 92% in year 2005, this deficit, is a clear indicator of a direct dependency on global markets to provide for local needs, this means that Lebanon has always to catch up with global prices and this would endanger local purchasing power tremendously, since it has to catch up with the rate of purchasing power in developed countries (European countries for example).

Deficit between imports and exports