Rentier economic value describes value derived from the scarcity, rather than innovation, of supply. This scarcity is also often called “rent”, and is the product of monopolistic behaviors or the inherent nature of certain commodities and services.
Nicknamed “the Merchant Republic”, Lebanon has enjoyed a services-oriented economy since its earliest days, reliant on finance, trade, real estate and tourism.
The dominance of these industries often considered “rentier sectors” has come at the expense of innovative, industrial and high-value manufacturing sectors.
The rentier structure of the economy has played a major role in Lebanon’s lack of production and consistent trade deficits, which have ranged from $10bn-20bn per year since 1990, sometimes reaching 30% of GDP. It has also led to high government deficits, by encouraging an over bloated public sector funded by easy banking profits, at the expense of innovative investments.
After Lebanon enacted the Banking Secrecy Law in 1952, transforming it into the financial hub of the Middle East, the country’s banks began attracting deposits from across the Arab world and the diaspora community, leading to a strong currency, the accumulation of reserves and strong economic growth.
While this had many benefits at the time, secondary consequences of a strong currency and the lack of trade protection included an uncompetitive environment for agriculture and industry. Lebanon had found great wealth but struggled to transform itself into a more inclusive and sustainable system.
After the war, the militiamen rose to power via their sectarian clientelist tendencies, creating a sort of neo-feudalistic system that turbocharged rent-seeking.
Monopolization of markets. Privatization of lands. Real estate bubbles. Exorbitant interest rates. Appropriation of development aid. Reliance on remittances. Over-bloated public sector. Import-export smuggling. Banking mafia.
All of these exhibit rent-seeking behaviors in one way or another. In the end, the laws of nature do not discriminate. Rentier value will always adjust to its real fundamental value on a long enough timeframe…