Political Economy Paradigms, Politics, and Subsidy Designs. the Unique Case of Lebanon Managing Subsidy Implementation and Subsidy Lift during the Crisis

The Lebanese subsidy system constitutes a unique case in the MENA region since it was historically aligned with, and to some extent shaped by, the political construction of a liberal economic model, with minimal state intervention in market allocation and anti-protectionist commercial regulations intended to accelerate trade liberalization. Therefore, since the independence and until the Lebanese civil war (1975-1990), subsidies in the “merchant republic” were negotiated, legitimized, or contested on the grounds of liberal commercial orientations, unlike its neighboring Arab countries where subsidies were mainly linked to “import substitutes” and protectionist mercantilist (anti-liberal) measures. Today, they are still at the core of contemporary political and social divides, especially after the financial collapse in 2019 and the consequent multilayered Lebanese crisis (ranked among the top 10, “and probably the top 3” according to the World Bank). Especially between 2020 and 2022, both the introduction and the lifting of new subsidies schemes unleashed a heated political controversy in Lebanon, that one might call a “subsidy war”, echoing the (highly charged) public and scientific debates on subsidies costs and benefits in the MENA region.

This study intends to assess to what extent the neo political turn in the last decades (especially 1990-today), has shaped subsidies’ structuring, design, and politics behind it, exacerbating, not only the unfair redistribution of the Lebanese liberal subsidy system, but also the political elite capture over public money. It will showcase the management and mismanagement of subsidies and subsidy lift during the last economic crisis with particular focus on the wheat and health sectors, highlighting the risks behind a discretionary design of monetary subsidies in a context of extreme fiscal constraints, and de facto contributing to institutionalize a tendency towards an exclusionary approach to social protection.