Lebanon's economic miracle is coming undone, and the talent of the Lebanese to thrive on their misfortunes and make money out of thin air is drying up.
The Moslem quarters of Beirut observed a strike today in what leftist groups described as a "first warning" to the government to do something about inflation, the high cost of living and a visibly worsening economic situation.
A dramatic appreciation of the U.S. dollar on local markets has sent prices soaring and has distracted the Lebanese from their conventional worries over politics and security.
Despite the continuous political turmoil and wars that have afflicted Lebanon since 1975, its economy remained remakably resilient until mid-1983. In 1983, however, exports fell by half and net income from services dropped by 40 percent.
"We can't keep spending before restoring revenue," said Prof. Samir Makdessi, chairman of the Economics Department at the American University of Beirut and head of the newly established Institute of Money and Banking at the university.
"No economy can survive without production; here they go on strikes," said economics professor Nadim Munla, commenting on today's strike.
Those in the lower income brackets are the worst hit by the meteoric rise in the exchange rate of the U.S. dollar against the Lebanese pound, which dropped to an all-time low of 15 Lebanese pounds to the dollar earlier this month and stabilized at 14 pounds this week.
At the end of 1982, one U.S. dollar was the equivalent of 3.70 Lebanese pounds. For a country that imports around 80 percent of what it consumes, the sharp appreciation of the dollar has made a big dent in the purchasing power of the local currency.
While convoluted political discussions once dominated every conversation between Lebanese, now the only thing on their mind is how much things cost. Roadside vegetable and fruit vendors who use crates and pushcarts to display their goods shrug at customers dismayed by higher prices and say it is because of the dollar.
A well-established West Beirut physician said he calculated that after 25 years in practice he is roughly making the same amount in dollars he earned as a resident. He said he could no longer afford to pay for the education of his children in the United States at current exchange rates.
The inflation rate for the month of January alone was 35 percent, which was equal to that of all of last year. Imported foods are no longer affordable by a larger section of the population.
A west Beirut resident filled up his cart at a supermarket, and when he came up to the counter he told the cashier he could not pay. "I need to feed my children. You can kill me if you want. I have no other choice," he said. The manager let him go with his shopping bags. Others are stealing to keep up with their expenses.
Economists argue that Lebanon is not on the verge of a famine but of hardships. "We have to reorder our economic priorities and change expectations," observed Makdessi. "Now we are getting poorer and we have to adjust to a new way of life," echoed Munla. The Lebanese, who have long been envied for getting away with living far beyond their means, may no longer be able to do so.
Beirut always has been noted for its wide selection of foreign foods, wines and the latest creations in Parisian designer clothes. Now people are buying less. The influx of political money to Palestinian guerrillas in the past and to the militias that flourished between 1975 and the Israeli invasion has trickled down to negligible amounts. The wild abundance that made Lebanon livable at the worst of times of shelling and street fighting has given way to thrift and poverty.
This is not as detectable in the Christian sector of the capital, however, where the influential Phalange Party supervises prices and where more affluent residents have decided to ignore the poor on the other side of the city, maintaining their affluent life styles as much as they can.
How Lebanon's economy finally got to this state is complicated and open to some dispute.
Many of Gemayel's critics accuse him of draining public finances by paying $1 billion for arms purchased on the open market. Those were used during the Druze-Christian mountain wars in September 1983 and to boost his army's strength in the fighting against Syrian-backed Moslem militias in February 1984. Both battles were lost and proved detrimental to religious cohesion of the armed forces and to confidence in the state.
A representative of the European Community in Beirut described the immediate period that followed the signing of the U.S.-sponsored May 17 withdrawal agreement with Israel in 1983 as "Lebanon's false spring." Things started falling apart soon after that.
The cold-blooded massacres involving Druze and Christians in the Chouf and Aley mountains jolted many Lebanese into realizing that what was happening in Lebanon was in fact a civil war. Before, the Palestinians, Syrians and Israelis could be blamed for Lebanon's woes. This shook the confidence of many Lebanese in the future of their country.
The fatal blow came last February, when Shiite and Druze militias wrested control of mainly Moslem west Beirut from the Christian-commanded Army. As a result the Army split along religious lines and more destruction was heaped on the city and its southern suburbs.
According to Elias Saba, a former finance minister and chairman of the Allied Business Bank, "all economic indicators converted against us." A recession in the Persian Gulf countries, declining oil income and the burden of the Iranian-Iraqi war greatly limited employment opportunities for Lebanese expatriates, who until 1983 were pumping $150 million a month into the Lebanese banking system in remittances to their families.
A virtual standstill in trade and exports since the Israeli invasion, the sharp drop in capital inflow and the first deficit in Lebanon's balance of payments in 1983 set off a progressive slump in economic activity. Arab countries, nervous about the infiltration of Israeli goods via Lebanon, turned back trucks with Lebanese fruits and vegetables and introduced tight controls on imports from Beirut.
Lebanon's balance of payments, in surplus until 1982, sustained a $930 million deficit in 1983 and one of $1.4 billion in 1984. The latest International Monetary Fund report on Lebanon said the Central Bank's foreign currency reserves dropped by more than $1.2 billion, with $520 million used in currency support operations and $763 million to meet the Central Bank's foreign exchange requirements.
The Central Bank's foreign currency holdings are now estimated at $200 million to $300 million, down from roughly $2.6 billion at the end of 1982. Lebanon spends between $65 million and $70 million a month on sugar, wheat and fuel, which means that its foreign currency holdings will be depleted in about four months.
Another major drain on government income has been the string of militia-controlled private ports depriving state coffers of customs duties and taxes, which brought in 40 percent of treasury receipts before 1975. While around 3 billion Lebanese pounds were written into last year's budget as expected customs revenue, only 400 million were collected.