People's Revolt in Lebanon (Page 4)

The gleaming downtown became a symbol of Hariri's reign and his failed economic policies. By the time he left office Lebanon had a $36 billion public debt, or 170 percent of GDP--one of the highest debt-to-GDP ratios in the world (it's now 190 percent). For much of Hariri's term, he relied on Siniora, an old friend, as his finance minister.

Siniora's biggest triumph as finance minister was the 2002 Paris II Donors Conference, which netted Lebanon $4.4 billion in soft loan guarantees. In return Siniora promised a raft of neoliberal economic reforms: He would privatize state assets like cellphone contracts, reform the country's civil service sector and balance the budget by 2006. Nine months before the donors conference, Siniora imposed Lebanon's first value-added tax (VAT): a 10 percent surcharge on most goods except food and medicines. One of his main arguments for staying in office is to shepherd a Paris III conference scheduled for January, in which international donors are expected to contribute toward rebuilding the infrastructure devastated by last summer's Israeli offensive.

"Because of Siniora and his economic programs, we have a very flawed tax system, based on indirect taxes. Statistically, it has been shown that this system recycles money from the poor to the wealthy," says Fawwaz Traboulsi, a political science professor at the Lebanese American University. "We have a 10 percent flat income tax, but most state revenues come from indirect taxation: the VAT, fuel taxes, utility surcharges. Salaried people pay the bulk of these taxes."

Throughout his tenure, Hariri clashed with the Syrian-backed Lebanese president, Emile Lahoud. In February 2005 Hariri was assassinated in a massive bombing as his motorcade drove through Beirut's seaside corniche. Widely assumed to have been carried out by Syria or its agents, the killing shook Lebanon and cast a harsh light on Syrian hegemony over the political system. Under internal pressure and mass demonstrations, the Syrian-backed prime minister resigned and Damascus pulled its 14,000 troops out of Lebanon. After elections in June 2005, the new parliamentary majority--a coalition of Christian, Sunni and Druse parties--appointed Siniora as prime minister. For the first time, Hezbollah joined the Lebanese Cabinet, securing two seats in Siniora's administration.

Until last summer's Israel-Hezbollah war, Siniora continued with the economic policies he had begun under Hariri. Morality aside, there's one major problem with these soak-the-poor economics: They strengthen Hezbollah. In a country divided drastically between haves and have-nots, a large proportion of the have-nots happen to be Shiites, and they rely for social services not on the government but on Hezbollah. In their view, the government takes, while Hezbollah provides.

After the latest war, with Israeli bombs targeting Shiite-owned factories and businesses in the south and in the Beirut suburbs, the Shiite middle class was devastated. This has made Shiites even more dependent on Hezbollah, as evidenced by the group's handing out up to $12,000 in cash payments to everyone whose home was destroyed. The money--most likely provided by Iran--was intended to pay for a year's rent and new furniture while reconstruction begins.

Locked in a state of perpetual conflict, Lebanon today faces the same choice it had in 1990, when the civil war ended. It can replicate the political system that it had before--based on corrupt sectarian warlords dividing up the spoils of the war they perpetuated--or it can try to produce a stronger and more egalitarian system, one that isn't based on religious divisions and that won't consign its largest sect, the Shiites, to the care of an Iranian-funded religious party.

"How can we still accept this government that steals? This government that built this downtown and accumulated this huge debt?" asks Matairek, the Shiite carpenter. "Who's going to pay for it? I have to pay for it, and my son is going to pay for it after me."

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