Ruinous Lebanese Economic Policy. (updated data)

by Ghassan Karam

A common mistake that is committed, all over the world, is to assume that economic growth in the GDP of a country is synonymous with a higher level of welfare for the populace of that country. The simple reason for that error is the inability to distinguish between a larger economic pie for the country and the shares into which that pie is distributed. Maybe the easiest way to describe this is in terms of what has happened to the US economy and has been popularized globally by the Occupy movement. There is no doubt that the US economy has experienced growth both in nominal as well as real terms over the past four decades. Yet the macro economic data shows that the top 1% of households have increased their share of income from around 10% to around 35%. That is obviously good news for the lucky few who belong to this rare slice of the US population. But if the share of the top 1% has more than tripled then this can only mean that the share of the others has declined. And since the overall growth in income has been rather anemic then the data shows conclusively that many; up to 75% according to certain studies; have not managed to maintain the real income of 30-40 years ago. This is the phenomenon that is widely discussed in the press and that occupied an important position in the recent US presidential debates.

So what does all of the above have to with Lebanon? My recent analysis of the net wealth figures that have been released recently point to a Lebanese problem that is even of a larger magnitude than that of the US and that ; to the best of my knowledge; is never adequately addressed.

Ever since the 1990’s many Lebanese individuals, politicians as well as media outlets have spoken favourably of the growth attained in the Lebanese GDP and have even “boasted” about the expensive residential towers in Beirut as well as its world class restaurants and luxury boutiques. The underlying assumption by most is that this growth in Beirut and its environs was good for the average Lebanese and is a sign of a healthy economy. Unfortunately the facts paint a different picture.

Net Worth studies, which are not yet based on very solid data but are becoming increasingly used as a gauge to understand world wealth, have shown that the approximate total Net Worth of Lebanon is under $100 billion. (My own estimate places it around $90 billion). Unfortunately; and this is the rub; Lebanon has only 9316 individuals each of whom can claim a Net Worth of over a million USD. Look at the above statement again: less than ¼ of 1% of the Lebanese belong to the select club of  High Networth and this group, as small as it is, lays claim to over $72 billion of the total $90 billion for the whole country. This simply means that 99.77% of the people have 20% of the national wealth when 0.23% owns the other 80%. This is a huge wealth gap by almost any standard and is nothing else but a reflection of what ails the Lebanese economy. The Lebanese governments over the past two decades have mismanaged the economy by accumulating one of the highest burden of  national debts in the world and have employed these resources to construct projects and infrastructure facilities that does not cater to the quality of life of the typical Lebanese when common sense and economic development principles would have called for investments that are fundamental to the life of the typical person, spread all across the country and are especially oriented towards job creation and poverty reduction. Why would anyone expect a country to become a tourist destination when it lacks the basics of electricity, modern telephony, crumbling transportation system, expensive air flights and lack of security among many other shortcomings?

It is true that Lebanon has been rebuilt after the civil war but it has been rebuilt to cater to the needs of less than 10,000 individuals and their immediate families. If it is assumed that the average size of the household is 4 then all the fancy construction and the gastronomical delights in addition to the luxury shopping emporiums cater only to 40,000 Lebanese citizens to the exclusion of the other 4 million whose interests are not taken into consideration by the Lebanese governmental decision makers. The best that the over 99% can do is carry part of the debt burden created for the enjoyment of others and participate by being onlookers from the side lines. This misinformed policy will only have a disastrous ending.

The following table shows the distribution of High Networth individuals in Lebanon:

Number of Individuals                  Wealth in USD

7647…………………………………..1-5 Millions

873…………………………………….5-10 millions

653…………………………………….10-50 millions

75………………………………………50-100 millions

56………………………………………100-500 millions

6………………………………………..500-1000 millions

6………………………………………..> 1000 millions

  • Sebouh80

    First of all, thank you Mr.Karam for writing this informative article. Please is it possible to provide us the source material that indicates roughly 9316 individuals own over $72 billion of the total $90 billion for the whole country.

    In any case, if we want to use the classical Marxist interpretation of the Lebanese society than the 0.27% or 9316 individuals represent the grande bourgeoisie whom they have absolute influence either directly or indirectly into all spheres of influence of the country. These individuals could most probably be senior Lebanese politicians and their families, and sometimes we find them in direct partnership with the upper echelons of business society. Apart from that, my guess is there might be another 10 to 15% that represents the professional class the traditional Middle Class members which are gradually losing their ground to the upper bourgeois class. Today there is another social layer in Lebanon which embodies the upper Middle Class habits are in a way rather different than the traditional old Money, of inherited wealth. These individuals are rich people who acquired their wealth within their own generation. Sociologically, nouveau riche describes the man or woman who previously had belonged to a lower social class and economic stratum within that class, and that new money which constitutes his or her wealth allowed upward social mobility and provided the means of conspicuous consumption, the buying of goods and services that signal membership in an upper class. The majority of the Lebanese, however, are workers and oppressed people who are desperately trying to make ends meet in these deeply challenging times.Moreover, another reason that we need to pay close attention is that normally in any society that is deeply divided like ours we would expect a social revolution to take place at some point due to the accumulated tensions within the society. 
    However, in a country like Lebanon, this would be easier said than done. Now allow me to explain why that is the case. What one discovers after studying the internal social dynamics of Lebanon is that Lebanon or any other Arab country is still unable to translate their consciousness into collective, organized power. In other words, family and sect interests, not class interests, dictate the course of political rivalry. Finally, today Lebanon with its huge social dislocations resemble to a great extent to Charles Dickens classic novel “A tale of the two cities” which was written in 1859.

    • Ghassan Karam

       Sebouh,
                  Your initial point about many of the rich belonging to the actual political leaders is very true in the case of Lebanon. According to the world bank Lebanon has 6 billionaires and 6 individuals that have a Networth between $500 and $ 1 Billion. My guess is that this elite group of 12 includes Mikati, Hariri, Safadi and possibly Jumblatt , Beri and others. These individuals will not legislate and implement policies geared to the benefit of the struggling poor. Furthermore this concentration or wealth is arguably one of the most pronounced in the world. In the US it would take more than 4% of the population to account for 80% of the wealth. The real figure is that the top 10% account for 87%. This means that if Netwealth in Lebanon is to beequally unfairly distributed that membership in the club of those that have a wealth exceeding $1 million should be over 150,000 instead of the current 9310. This simply is unacceptable and it does provide the answer to the question of what ails the Lebanese economy.

      • Michaelinlondon1234

         It is worth doing a comparative study
        eg A policeman in Indonesia earns about £100 a month last year
        in Libya before its destruction $100 a month (at that time Libya had one of the highest average wage levels in Africa)
        in the UK about $700 to 800 a week (depends on exchange rate.)
        in the US some states about the same.
        As an average indicator a police persons wages are a good guide for mid rank public servants.
        What is not factored in is cost of living (Taxes, rents, Food, Fuel)
        How much in Lebanon?
        Economies are like agriculture.
        In Europe ask the Irish about the history of the potato famine. (A really good example of monoculture going wrong)

        • 5thDrawer

          Errr … taxes ?? ;-)

    • 5thDrawer

      We’re not forgetting the ‘religious leaders’ of course.

  • Sebouh80

    First of all, thank you Mr.Karam for writing this informative article. Please is it possible to provide us the source material that indicates roughly 9316 individuals own over $72 billion of the total $90 billion for the whole country.

    In any case, if we want to use the classical Marxist interpretation of the Lebanese society than the 0.27% or 9316 individuals represent the grande bourgeoisie whom they have absolute influence either directly or indirectly into all spheres of influence of the country. These individuals could most probably be senior Lebanese politicians and their families, and sometimes we find them in direct partnership with the upper echelons of business society. Apart from that, my guess is there might be another 10 to 15% that represents the professional class the traditional Middle Class members which are gradually losing their ground to the upper bourgeois class. Today there is another social layer in Lebanon which embodies the upper Middle Class habits are in a way rather different than the traditional old Money, of inherited wealth. These individuals are rich people who acquired their wealth within their own generation. Sociologically, nouveau riche describes the man or woman who previously had belonged to a lower social class and economic stratum within that class, and that new money which constitutes his or her wealth allowed upward social mobility and provided the means of conspicuous consumption, the buying of goods and services that signal membership in an upper class. The majority of the Lebanese, however, are workers and oppressed people who are desperately trying to make ends meet in these deeply challenging times.Moreover, another reason that we need to pay close attention is that normally in any society that is deeply divided like ours we would expect a social revolution to take place at some point due to the accumulated tensions within the society. 
    However, in a country like Lebanon, this would be easier said than done. Now allow me to explain why that is the case. What one discovers after studying the internal social dynamics of Lebanon is that Lebanon or any other Arab country is still unable to translate their consciousness into collective, organized power. In other words, family and sect interests, not class interests, dictate the course of political rivalry. Finally, today Lebanon with its huge social dislocations resemble to a great extent to Charles Dickens classic novel “A tale of the two cities” which was written in 1859.

    • http://profiles.google.com/karam.ghassan Ghassan Karam

       Sebouh,
                  Your initial point about many of the rich belonging to the actual political leaders is very true in the case of Lebanon. According to the world bank Lebanon has 6 billionaires and 6 individuals that have a Networth between $500 and $ 1 Billion. My guess is that this elite group of 12 includes Mikati, Hariri, Safadi and possibly Jumblatt , Beri and others. These individuals will not legislate and implement policies geared to the benefit of the struggling poor. Furthermore this concentration or wealth is arguably one of the most pronounced in the world. In the US it would take more than 4% of the population to account for 80% of the wealth. The real figure is that the top 10% account for 87%. This means that if Netwealth in Lebanon is to beequally unfairly distributed that membership in the club of those that have a wealth exceeding $1 million should be over 150,000 instead of the current 9310. This simply is unacceptable and it does provide the answer to the question of what ails the Lebanese economy.

      • Michaelinlondon1234

         It is worth doing a comparative study
        eg A policeman in Indonesia earns about £100 a month last year
        in Libya before its destruction $100 a month (at that time Libya had one of the highest average wage levels in Africa)
        in the UK about $700 to 800 a week (depends on exchange rate.)
        in the US some states about the same.
        As an average indicator a police persons wages are a good guide for mid rank public servants.
        What is not factored in is cost of living (Taxes, rents, Food, Fuel)
        How much in Lebanon?
        Economies are like agriculture.
        In Europe ask the Irish about the history of the potato famine. (A really good example of monoculture going wrong)

        • 5thDrawer

          Errr … taxes ?? ;-)

    • 5thDrawer

      We’re not forgetting the ‘religious leaders’ of course.

  • Sebouh80

    Mr.Karam.
    My guess is you must have obtained these figures from the World Bank. My question is how can the World Bank or any other  major organized institution know such detail facts about wealth figures in Lebanon, and especially taking into consideration that Lebanon ever since the 1950s has adopted strict Banking secrecy laws.
    The other thing that I want to highlight is that this report does not seem to have taken into account the large deposits of funds and investments the rich Lebanese have in the offshore banks of Cayman islands, Jersey and many other places.

    • Ghassan Karam

       Sebouh,
                  As I have said in the original post, Wealth studies are not prcise but they have been becoming better all the time. Obviously the data for the developing countries is even less reliable than that for the developed ones but so far all studies have shown that these results in relative terms are pretty accurate. Rough networth for a country is not difficult to estimate: Total assets – total liabilities . Even Nertwoth for many individuals is relatively accurate; Forbes, Credit Suisse and others have been collecting such figures for some time. Note that a High networth individual starts at $1million and so I imagine that the larger is the networth the smaller is the group that belong to it and the more meaningful is the estimate. The US and most EU coutries provide reliable wealth data but in the case of Lebanon and other developing countries not much can be said about the exact wealth distribution besides the fact that if a country such as Lebanon is estimated to have a national networth of $90 billion and the top 0.23% have 20% of that then the other 99.77% have a networth of only 418 billion. Global trends lead one to suspect that most of that belongs to the remainder of the top 10-15% which implies that possibly 75-85% of the Lebanese population does not have a positive networth. That is not surprising since many of the population carries a debt that is equal to or larger than its assets.

      • 5thDrawer

        Not counting the women who’s husbands and fathers died, which left them begging to acquire the estates of same, since lawyers need to work heavily to achieve that – where ‘equal rights’ do not exist.

        Good article again Ghassan … need to bring more of these things down to ‘layman’s’ terms.

  • Sebouh80

    Mr.Karam.
    My guess is you must have obtained these figures from the World Bank. My question is how can the World Bank or any other  major organized institution know such detail facts about wealth figures in Lebanon, and especially taking into consideration that Lebanon ever since the 1950s has adopted strict Banking secrecy laws.
    The other thing that I want to highlight is that this report does not seem to have taken into account the large deposits of funds and investments the rich Lebanese have in the offshore banks of Cayman islands, Jersey and many other places.

    • http://profiles.google.com/karam.ghassan Ghassan Karam

       Sebouh,
                  As I have said in the original post, Wealth studies are not prcise but they have been becoming better all the time. Obviously the data for the developing countries is even less reliable than that for the developed ones but so far all studies have shown that these results in relative terms are pretty accurate. Rough networth for a country is not difficult to estimate: Total assets – total liabilities . Even Nertwoth for many individuals is relatively accurate; Forbes, Credit Suisse and others have been collecting such figures for some time. Note that a High networth individual starts at $1million and so I imagine that the larger is the networth the smaller is the group that belong to it and the more meaningful is the estimate. The US and most EU coutries provide reliable wealth data but in the case of Lebanon and other developing countries not much can be said about the exact wealth distribution besides the fact that if a country such as Lebanon is estimated to have a national networth of $90 billion and the top 0.23% have 20% of that then the other 99.77% have a networth of only 418 billion. Global trends lead one to suspect that most of that belongs to the remainder of the top 10-15% which implies that possibly 75-85% of the Lebanese population does not have a positive networth. That is not surprising since many of the population carries a debt that is equal to or larger than its assets.

      • 5thDrawer

        Not counting the women who’s husbands and fathers died, which left them begging to acquire the estates of same, since lawyers need to work heavily to achieve that – where ‘rights’ do not exist.

        Good article again Ghassan … need to bring more of these things down to ‘layman’s’ terms.

  • breakthemould

    Isn’t this the definition of a Banana Republic?

  • breakthemould

    Isn’t this the definition of a Banana Republic?

  • Hannibal

    Take the $$$ with you to your grave…
    and the story of my demise has been greatly exaggerated. lol …
    Just tooooooooooooooooooooooooooo busy to post.
    Hello everyone and happy spring!!!

    • 5thDrawer

      Nice to know you’re still ‘around’ Hannibal .. Been ‘lean’ here lately. ;-)
      Even Ghassan has written little.
      I think most of us are giving up on trying to ‘advise’ a pack of idiots. :-)))

      • http://yalibnan.com/ geo metro

        greetings 5th and the rest of the gang,

        my advice to every one is to NEVER NEVER EVER be impressed by anyone just because of their wealth, money is a neccessary evil and it has its place….a good person with lots of it can help others if he had the right priorities and heart condition.
        most of my clients are very wealthy and very miserable, you are only rich when you have something money can not buy.

        • 5thDrawer

          Amen. (some pocket-change helps, however…)

          • http://yalibnan.com/ geo metro

            pocket change wont cut it for you bro… you drink the good octane :)

          • 5thDrawer

            Hehehe … I try, Geo. But, for a ‘slow news’ day for all the folks … I found this interesting ‘little bit’ … if I can push it into here. :-))
            Download for ‘Study Group’. ;-)

          • Hannibal

            You will find Pro-Syrian and Anti-Syrian but sadly none is Pro-Lebanese.

          • AntiFSA

            I think most are pro Lebanese, However our liking of different political parties can over shadow how we express our love for Lebanon. .

          • 5thDrawer

            13 … unlucky number to start with Anti … and 10 too many.

          • Hannibal

            Nicely said…
            Have you seen what those bastards did in my backyard? (Boston bombing)
            The innocent always pays the price. :(

          • AntiFSA

            Hannibal my friend, animals will always be animals. Only a low life would do such a thing. I just hope the death toll does not reach more than 2. I really feel sorry for the innocent people who always get caught up with all the bullshit.

          • 5thDrawer

            I hope you meant ‘does not’. But so far 3. One an 8-hr-old child. And several amputations. Bombs designed to shred flesh it seems … mostly at knee-level of the adult spectators.
            Not quite the huge blasts in Iraq … but all still sordid events by sick minds.

          • AntiFSA

            Shit, Thanks 5th, yes it was most defiantly ‘does not’. I better change it.

        • Hannibal

          Hi Geo:

          Right ON on the last sentence…

          I am happiest on the exercise bike 5 am eyes shut ears full with Oṃ maṇi padme hūṃ while thinking of nothing I feel the creator of all.
          Try it: http://www.youtube.com/watch?v=iG_lNuNUVd4

          It is serene and peaceful…

          Om: Generosity – Purifies Pride / Ego

          Ma: Ethics – Purifies Jealousy / Lust

          Ni: Patience – Purifies Desire

          Pad: Diligence – Purifies Ignorance / Prejudice

          Me: Renunciation – Purifies Possessiveness

          Hum: Wisdom – Purifies Aggression / hatred

          God Knows we need all levels of purifications in Lebanon.

          • http://yalibnan.com/ geo metro

            5 am??? 3 dreams left to go for me at that time lol

      • Hannibal

        lol

    • AntiFSA

      Welcome back Hannibal, I have missed debating with you. It is also good to see you are back to using you orignal name.

  • José Jalapeño

    Take the $$$ with you to your grave…
    and the story of my demise has been greatly exaggerated. lol …
    Just tooooooooooooooooooooooooooo busy to post.
    Hello everyone and happy spring!!!

    • 5thDrawer

      Nice to know you’re still ‘around’ Hannibal .. Been ‘lean’ here lately. ;-)
      I think most of us are giving up on trying to ‘advise’ a pack of idiots. :-)))

      • http://yalibnan.com geo metro

        greetings 5th and the rest of the gang,

        my advice to every one is to NEVER NEVER EVER be impressed by anyone just because of their wealth, money is a neccessary evil and it has its place….a good person with lots of it can help others if he had the right priorities and heart condition.
        most of my clients are very wealthy and very miserable, you are only rich when you have something money can not buy.

        • 5thDrawer

          Amen. (some pocket-change helps, however…)

          • http://yalibnan.com geo metro

            pocket change wont cut it for you bro… you drink the good octane :)

          • 5thDrawer

            Hehehe … I try, Geo. But, for a ‘slow news’ day for all the folks … I found this interesting ‘little bit’ … if I can push it into here. :-))
            Download for ‘Study Group’. ;-)

          • José Jalapeño

            You will find Pro-Syrian and Anti-Syrian but sadly none is Pro-Lebanese.

          • http://twitter.com/AntiFSA AntiFSA

            I think most are pro Lebanese, However our liking of different political parties can over shadow how we express our love for Lebanon. .

          • 5thDrawer

            13 … unlucky number to start with Anti … and 10 too many.

          • Hannibal

            Nicely said…
            Have you seen what those bastards did in my backyard? (Boston bombing)
            The innocent always pays the price. :(

          • http://twitter.com/AntiFSA AntiFSA

            Hannibal my friend, animals will always be animals. Only a low life would do such a thing. I just hope the death toll does reach more than 2. I really feel sorry for the innocent people who always get caught up with all the bullshit.

          • 5thDrawer

            I hope you meant ‘does not’. But so far 3. One an 8-hr-old child. And several amputations. Bombs designed to shred flesh it seems … mostly at knee-level of the adult spectators.
            Not quite the huge blasts in Iraq … but all still sordid events by sick minds.

          • http://twitter.com/AntiFSA AntiFSA

            Shit, Thanks 5th, yes it was most defiantly ‘does not’. I better change it.

        • José Jalapeño

          Hi Geo:

          Right ON on the last sentence…

          I am happiest on the exercise bike 5 am eyes shut ears full with Oṃ maṇi padme hūṃ while thinking of nothing I feel the creator of all.
          Try it: http://www.youtube.com/watch?v=iG_lNuNUVd4

          It is serene and peaceful…

          Om: Generosity – Purifies Pride / Ego

          Ma: Ethics – Purifies Jealousy / Lust

          Ni: Patience – Purifies Desire

          Pad: Diligence – Purifies Ignorance / Prejudice

          Me: Renunciation – Purifies Possessiveness

          Hum: Wisdom – Purifies Aggression / hatred

          God Knows we need all levels of purifications in Lebanon.

          • http://yalibnan.com geo metro

            5 am??? 3 dreams left to go for me at that time lol

      • José Jalapeño

        lol

    • http://twitter.com/AntiFSA AntiFSA

      Welcome back Hannibal, I have missed debating with you. It is also good to see you are back to using you orignal name.