A Political Economy of Lebanon, 1948–2002: The Limits of Laissez-Faire

Abstract

The mam theme of this book is the evaluation of the laissez-faire strategy of development, based on Lebanon's economic experience in 1948-2002.For over 40 years, Lebanon has been the only laissezfaire economy in the developing world.As such, it provides a singular case study of the effectiveness of the market strategy for development that is advocated by mainstream economics.The book first reviews the mainstream and alternative theories that explore the basis for economic development.A standard assessment of the growth and development performance of the Lebanese economy follows.The main findings are that, in the favorable period of 1948-1974, economic growth in Lebanon was less than what was achieved by neighboring or developing countries in general, and was particularly wanting in relation to the potential that was afforded by capital abundance, a strong financial condition and large export markets.In addition, the distribution of income and wealth remained skewed and the overall level of skills modest.Much of the positive performance achieved has been due to non-market elements, mostly in the form of transfers from households, community institutions and government.The analysis is based on an annotated rebuilding of the major macroeconomic account series since 1948.The process of industrialization is separately analyzed.Despite experience, accommodating Arab markets and no capital shortage, Lebanese industry could not expand, hampered by low productivity and competition from imports to an open domestic market with a strong currency.However, low productivity was partly alleviated by enhanced mechanization and increasing exports to receptive Arab markets.An interpretation of the dynamics of the system is presented from a post-Keynesian perspective, with emphasis on behavior in an institutional context.Wages have usually been lower than the urban subsistence level.In response, workers turned to more work within the family, independent occupations with low barriers to entry, and to Toufic K.

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