Time for Lebanon to end the witch hunt and move on

It is no use talking about forgiveness while quoting Nelson Mandela, Desmond Tutu or Mahatma Gandhi to ruined depositors whose life savings are stuck in Lebanese banks and may be lost forever. They want justice, accountability and perhaps revenge or retribution; someone needs to be punished for the crime, heads need to roll.

This is the mood in the country and it is more emotional than it is rational. You can lose many friends arguing for a financial amnesty, for turning the page, moving on and looking forward to rebuilding the country and the economy instead of bickering over the past. I am willing to make the sacrifice.

We are all victims of the catastrophic financial collapse. Behind it are “real” economic and political causes that no single actor had control over. For the last 20 years, the country has been the target of constant battering until it disintegrated. It was dragged into two major wars with Israel, accompanied by assassinations, paralytic political crises, smuggling, the cost of the Syrian war, the Beirut port explosion and much more.

Lebanon was isolated from its main economic partners and boycotted. The country was drained year after year at huge cost in wealth, in income, in people and in friends. The loss was not purely economic, it was also reputational — the country is now seen as a hopeless failed state. What we are arguing about are merely the mechanics of that collapse and the financial repercussions.

As I write this, every family in Lebanon is wondering whether to cancel their expatriate children’s trip home for the holidays because of the rumors of an upcoming war. It is difficult to evaluate the economic cost of this uncertainty or of a failed season. This has happened almost every summer since at least 2011. These are the real losses to the economy and they are continuing. The crisis is not over.

What we are arguing about are merely the mechanics of the collapse and the financial repercussions

Nadim Shehadi

There is a misguided belief that a grand theft has been committed, represented by a myth about “plundered” or “looted” funds, and that the money can be recuperated by pursuing those who benefited. One example is the talk of illegitimate deposits, such as from drug smugglers or corrupt foreign politicians, and that these deposits should be dismissed without being repaid. Or that there is a possibility of chasing after transfers abroad or recovering the higher interest paid to some depositors. Basically, that people’s deposits were stolen and can be recovered, which is not the case.

Even if true, the methods suggested to recover the looted funds are either impossible to achieve, of dubious legality or will yield insignificant results. There is no such thing as an illegitimate deposit. Bankers conduct due diligence about the legitimacy of funds before taking in deposits — they cannot do that after they accept the deposits and in order to justify not returning them. Such suggestions, if followed, would engage us in years of litigation and a damaging blame game that would be catastrophic for the country, especially if led by the government.

Measures to recover funds lack coherence and sound arbitrary — you can only pursue people if they have demonstrably violated the law. This is not how you rebuild trust in the system. The five years since the collapse have been as destructive as the crisis itself. The country cannot afford another five years of the same.

The key is rebuilding trust in the system. This is far more of a challenge when it comes to trust in institutions like the state and the rule of law. The private sector is easier because it is built on individual connections and relations.

All are guilty and all are victims at the same time: politicians and the state bear much of the responsibility, the central bank is blamed, bankers too, of course, but that is too easy. Even depositors are deemed not innocent for having benefited from high interest rates. We have seen accusations of corruption, greed, incompetence and negligence.

Decline can be permanent if we continue arguing about the past instead of developing a new vision

Nadim Shehadi

There is a risk of punishing the innocent while searching for the guilty. In medieval witch hunts, the suspected witches would be thrown in the river — if they survived, it would be proof they were guilty and so they were burned at the stake or hanged, while the innocent drowned. Both the guilty and the innocent died. Today, we are all accusing each other and, in the meantime, the country is falling apart, with the economy less than half what it was in 2018.

A country’s economy has many elements, some of which are concrete and palpable: resources, production, transactions, trade figures, human capital and value added. But there are also intangibles that cannot be measured or easily explained. They are about trust, confidence, mood, leadership, faith, drive and positive energy. When these turn negative, they are a symptom of self-destruction. Lebanon needs to be rescued from this negativity and additional self-destruction. People lost more than just money in the banks; the whole country’s economy is in freefall and this even affects those who have no deposits.

But then there is the larger picture and broader historical perspective. Lebanon’s rise and fall cannot be reduced to a crisis in 2019 — it is part of an 80-year history with regional and international dimensions. The country’s founders had a vision that became a reality when Beirut turned into a hub and a refuge for wealth and talent escaping transformations in the region. This is how the Lebanese banking sector was born. The losses are far more than generational wealth; this is the historical wealth of Levantine trading families and their connections going back centuries.

Most of all, there is the harsh reality that not every fall is followed by recovery and rebirth. Decline can be permanent if we continue arguing about the past instead of developing a new vision that will revive Lebanon’s potential in line with global and regional changes. An amnesty and an end to the witch hunt is the first step.

• Nadim Shehadi is an economist and political adviser. X: @Confusezeus