Mike Azar Profile picture
Oct 4, 2020 20 tweets 4 min read Read on X
1/ Crises like the many Lebanon faces can only be confronted by governments that can take decisive and difficult decisions. Two features of our system impede Lebanon’s ability to do this (which also explain why we keep spinning our wheels screaming about corruption & reforms):
2/

(a) Democracy by consensus among 6-7 competing political factions (mini-govts) that makes domestic politics similar to relations between independent states (i.e., anarchic w/ no "Govt" able to execute policy) & reforms analogues to int'l treaty negotiations between them; and
3/

(b) Communities feel no security, so politics in Leb is “existential” and not “policy-oriented”, so policy is nonexistent & communities can’t hold leaders accountable for failed policies because they fear harming their sect’s security interests & relative power vs the others
** It's important to recognize that players often make calculations based on "relative power" considerations vs competitors. So one may take a decision that causes it to lose power in absolute terms if it gains relative to competitors (so competitors lose more in absolute terms).
4/ We may not like or agree with the above, but they are facts of our political system for most people and, unless that changes, there won’t be much progress on any reforms or fighting corruption no matter what cabinet is appointed.
5/ This bug in our system of government makes reforms unlikely and suggests that the crises will be “solved” through "the path of least resistance", which is happening already, is sub-optimal, and will doom the majority of Lebanese to perpetual poverty.
6/ This is why we keep spinning our wheels demanding reforms and end to corruption. It is simply not possible to achieve either under the existing system. The reforms have been known for years. Corruption is a *consequence* of the political system dysfunction, not a cause.
7/ It's why the French Initiative failed. You don't even need to look at "regional" impediments. It can be explained by the incentives/calculus of the domestic mini-govts. If we don't understand these incentives, we will constantly make the wrong strategic choices.
8/ Don’t be fooled by the passage of laws or reforms on paper. They simply will not be implemented if they harm the interests of any of the 6-7 mini-governments in the absence of a strong central government with the ability to execute the laws.
9/ When a diverse society with legitimate internal and external security concerns is pushed into poverty, it makes reforms less likely, not more likely.
10/ We have to solve the 2 challenges above. The status quo powers have no incentive to change the system b/c it requires them to give up power, and power doesn't give itself up voluntarily. Also, legitimate security fears paralyze any potential change to the status quo regime.
11/ Many here won’t like to hear this, but I'm not sure federalism will work in Lebanon for the same reasons it did not work in Yugoslavia. Federalism requires a strong central govt, communities with a strong national identity/solidarity, and wealth transfers b/w regions.
12/ Yugoslavia pulled itself apart because one community tried to concentrate more power in the central government over time to its own advantage, there was big economic disparity between different federal states, and there was a strong sub-national identity/vision.
13/ A federal Leb will pull itself apart b/c the challenges that give rise to people’s desire for federalism here are the same ones that make a federal system unworkable. We have to address those first. Once we address those, a federal system may or may not be optimal at the time
14/ Therefore, the choice we face in my opinion isn't b/w centralized govt and federalism, but between reforming the centralized govt system (including through *some* effective forms of decentralization) or partition/confederation.
15/ Leb was de-facto partitioned during Civil War. A foreign military force reunited it. What stops same from happening again? Parties can quickly mobilize once conditions permit. The incentive now is for parties to arm themselves to improve bargaining positions in a future deal.
16/ If opposition groups want to be effective, they need to stop working separately & asking for voluntary transfer of power/independent cabinet. They need to work together as a united front w/ a clear & common political program that addresses the root causes of the dysfunction.
17/ Anything less is doomed to fail. Only real *power* or force can effect change. Power comes from either military force (which is why there is a big incentive for the mini-govts to become armed) or a united popular uprising (which can be peaceful).
18/ If status quo powers want to do what's best for their communities, they'd also hold national dialogues to answer these existential questions. However, given that any solution would cause a change in the *relative power* balance b/w the mini-govts, this will be very difficult.
19/ If the intl community really wants to help, it'd facilitate this national dialogue.

But I'm afraid such political restructurings -- because they necessarily result in a re-balancing of relative power -- are never done voluntarily, are never easy, and are rarely peaceful.

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Mike Azar

Mike Azar Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @AzarsTweets

Apr 7
1/ ANATOMY OF A FRAUDULANT CENTRAL BANK TRADE

The trades between Optimum Invest (OI) & Banque du Liban (BDL) are part of an elaborate accounting fraud and money laundering plot that OI facilitated. The Kroll report doesn't vindicate OI. A simple explanation of what happened:
** Firstly, this is damning for: (i) Alvarez & Marsal, which only uncovered 2 of 45 such trades in its poor-quality report; (ii) Deloitte, the auditor who didn't raise any red flags; & (iii) current BDL management for failing to investigate (investigate anything, not just this!)
2/ Anatomy of the trade

Simultaneously,
(a) BDL lends 100 to OI
(b) OI uses 100 to buy a Treasury bond from BDL for a price of 100 [numbers for illustration]
(c) BDL buys the same bond from OI for 150
(d) OI takes the excess 50, pays 49 to BDL as commission & keeps 1 as profit
Read 16 tweets
Mar 23, 2023
The IMF statement on Lebanon makes clear how far we are from implementing an IMF program here and undertaking any reforms to exit the crisis.

It paints a grim picture of the alternate scenario and is a direct rebuke of obstructionist MPs.

[A thread]

imf.org/en/News/Articl…
1. No change in the IMF view on financial sector restructuring: address losses upfront, respect the hierarchy of claims (i.e., bank shareholders lose first and then depositors), protect small depositors, and limit use of public assets/money given the unsustainable public debt. Image
2. The IMF recognizes that proposals calling for "Gov't to pay the losses using its assets" & "not touch any deposits" are NOT viable. They simply don't work b/c the numbers don't add up.

This is a message directed at Lebanese MPs and uninformed economists promoting such ideas
Read 16 tweets
Feb 2, 2023
1/ Stop everything and read the three-part investigation by @MaucourantNada describing never-before seen details of the European money laundering investigation into Lebanon's central bank governor. I will summarize below:

Part 1: The Fake Commissions

apple.news/A-4yMBH4UPRmuZ…
2/ Firstly, the investigations were launched starting in 2020 as a result of the Panama Papers leak, a change in financial disclosure rules and related anti-money laundering laws in Europe, and, in some cases, complaints filed by watchdog organizations abroad, incl @NowActs.
3/ So yes, contrary to popular opinion in Lebanon, Omar Harfoush and Wadi3 Akl have nothing to do with the investigations and are not behind them in any way. They are only exploiting them for political gain.
Read 26 tweets
Feb 1, 2023
Practically, this doesn't change much for the economy or depositors

It's being sold as "a step towards implementing the IMF deal" but it actually cuts against the philosophy of the deal - recognizing ALL losses upfront & not dragging it

IMO, it's part of the "no-IMF Plan B"

👇
- Financial sector losses should be resolved through a comprehensive bank resolution framework, not piecemeal circulars

- What about banks other losses (BDL exposure, etc.). These are much larger than the fx losses referenced in the article/circular, so why are they ignored?
- Will BDL adopt the new rate on its b/s & finally admit to its own capital/fx losses or will it continue hiding them via fraud?

- How much fx losses do banks actually have, how will they plausibly be closed over 5 years, and why use a fake 15,000 rate? Why drag on this misery?
Read 4 tweets
Dec 26, 2022
Looking back at the Lebanese economy in 2022, a few things things to note.
1/ The exchange rate trajectory has not really changed, & the last few weeks weren't out-of-the-ordinary. The change from 35,000 LBP to 46,500 LBP is the same as the change from 1,500 to 2,000 in % terms
2/ The balance of payments deficit was ~$3 bn, not much different from 2021. This is all financed using BDL reserves. Despite the continued devaluation of the LBP, the BOP deficit remains high and is not falling. It takes more than currency collapse to make a productive economy.
3/ BDL foreign currencies fell from $12.8 billion to $10.2 billion. The LBP depreciated from ~27,000 in Dec 2021 to ~46,000 in Dec 2022 (~40% loss in value). This is despite BDL intervening in the market with ~$2.5-3 billion.
Read 7 tweets
Nov 16, 2022
Based on Israel's summary of the framework agreement with Total/ENI, Lebanon's chief negotiator Elias Bou Saab either misled the Lebanese public about what was agreed in the maritime boundary deal or there's a serious misunderstanding between both sides.

gov.il/BlobFolder/new…
Elias Bou Saab indicated on Sar El Wa2t that Lebanon is indifferent to whatever is agreed between Total and Israel as we are not affected by it.

mtv.com.lb/vod/en/video/2…
But this framework agreement between Total/Israel indicates that Lebanon is directly affected by this agreement, which we had absolutely no say in.

For example, the framework agreement says:
Read 15 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

:(