World Power

Few countries can exert much power in the rest of the world. There are just five permanent members of the United Nations Security Council, the ones who can cast vetoes on important UN decisions. Or take the G7, a US-led political forum of rich countries that has, well, seven members. The concentration of global power is extreme, and it rests upon the different ways a country can have influence over how the world works.

Some of these ways are obvious, for example, using military power to force another country to submit. Many are not, especially those that are linked into the system that envelops the world economy. Five dimensions of international power can be used to gauge the status of countries.[1] These show not only how the US is far more prominent in the hierarchy than suggested by a simple measure of economic size, such as GDP. They also map the relative importance of other countries and throw new light on a major geopolitical issue today: the rise of China.

China rising

China was once seen mainly as an important supplier of cheap goods and a valuable dynamo for the world economy. Now the US looks upon China as the biggest threat to its global interests. Every year, many hundreds of pages on this topic are published for the US Congress, adding to a steady stream of material directed at US policymakers from think tanks and lobby groups.[2]

In 1990, China accounted for just 2% of the world's GDP. Since then, that share has doubled every decade and China will likely account for 18% in 2021.[3] This has worried the small group of countries that dominates the world’s key institutions, because quantitative changes can also bring about qualitative shifts. Will they be able to stay in charge as they had done, now that a country from outside the rich club has risen to the fore? That question is posed especially for the US. All those institutions – the United Nations, the IMF, the World Bank, the World Trade Organisation and others – have been shaped by it.[4] The first three also have headquarters in Washington DC or in New York.

Russia – formerly, the Soviet Union – is the traditional US political enemy. Yet, it is principally a military obstacle, notwithstanding the more recent US belief that it can influence Presidential elections through buying Facebook advertisements. China, by contrast, presents a much wider challenge to how the US sets the rules for the world, as seen when it ignores US-inspired sanctions against countries such as Iran. US political rhetoric and economic measures against China picked up with President Trump, and they have continued unabated with the new Biden administration. All the international meetings held by Biden and his officials since the start of the 2021 – at the G7, at NATO, in Europe and in Asia – have had a strong anti-China theme.

Measuring power

Power has many dimensions. Here are five aspects of economic and political power that are relevant for a country’s international influence.

Economic size is one measure of a country’s weight in the world, usually measured by its GDP. That GDP number is broadly related to the size of its domestic market, how many big corporations it has, and how important it is in international trade. The US is the world’s biggest economy, accounting for roughly 24% of world GDP. G7 countries – the US, Japan, Germany, the UK, France, Italy and Canada – together account for 45% of world GDP, despite having only 10% of the world’s population. GDP counts for more than people when it comes to power and influence.[5]

 

By 2020, China’s GDP was just under three-quarters of that for the US. Japan’s GDP was roughly a quarter the size of the US, Germany was at nearly a fifth, and the UK and France were each at roughly one-eighth. All countries have been affected by the Covid-19 pandemic, and it has had little effect on their relative positions. However, US sanctions will have curbed China’s growth to some extent in recent years.

A country’s foreign assets are another important measure of power. Such assets include the ownership of companies operating in other countries, together with holdings of financial securities, such as equities and bonds, and ownership of real estate.[6] These indicate how much control it has over resources in other countries, and the size of the assets is related to the potential revenues it can gain from them.[7]

At the end of 2020, the US had by far the highest stock of foreign assets, at roughly $22.7 trillion. Germany was next in line, but well below that with ‘only’ $6.3 trillion, and the Netherlands, the UK and France followed. China and Hong Kong’s foreign assets amounted to just under $5 trillion.

These asset ownership numbers, as much other published information, do not allow for the flows of finance between major countries and tax havens. Tax havens are registered as the owners of significant foreign assets in official data, yet most of their funds originally come from major country investors.[8] This should not have much effect on the top level calculations used here.[9]

International lending and borrowing by banks is a third measure. These data show how much a country is involved in channelling funds around the world, and are also linked to how far that country is a finance hub that can profit from international dealing. London is the largest centre for international banks. While it may be a surprise that London is bigger than Wall Street on this measure, that is because much US banking business is oriented towards the domestic US economy, not so much internationally.

Nevertheless, Brexit has had some impact on UK international banking. With the UK outside the single market for financial services in the EU, some banks have shifted their operations from the UK and into EU centres. France has gained most ground because of this, and jumped into second place just behind the UK by the end of 2020, moving ahead of the US, which was in third place (see the next chart).

How much a country’s currency is used in foreign exchange (FX) deals for trade and investment is another aspect of its economic status in the world. Directly or indirectly, this also adds to its global power. This is most evident for the US with the dollar, which is involved in 88% of all currency deals.

Most commodities and important industrial goods, including oil, metals, grains, technology, pharmaceutical and aerospace products, are priced for trade in terms of US dollars. The same is true for many investment and financial deals, helped by the US having the world’s largest stock and bond markets, with international private and official funds buying those securities. Even the China-led Asian Infrastructure Investment Bank conducts its business mainly in US dollars.

US power in this FX dimension relies on the fact that nearly all deals involving US dollars must be settled through the domestic US banking system. Images of drug dealers and criminals crossing borders with bags of cash may be good for the cinema, but they do not represent what really happens to international transfers of funds.

This means that if the US government doesn’t like you – whether you are an individual, a company or a country – then it can try to prevent you from doing currency deals, even if you are not based in the US. If a bank nevertheless does deal with you in dollars, or even in another currency, then the US can fine that bank and threaten to shut it out of the huge US market. The US government’s Treasury Department has a special agency for this purpose, appropriately named the Office of Foreign Assets Control.

Other countries with important currencies could try to exert power in the same way, but their currencies have far less international significance. For example, the euro’s share of world FX markets is just 32%,[10] with the Japanese yen half of that in third place and the UK’s pound sterling in fourth.[11] So far, China’s renminbi currency has remained very minor in terms of global trading, at around 4%.[12] This is based upon the relatively late inclusion of China in financial markets, together with many more government controls on the flow of capital than is the case for other major countries.

The amount of military spending is a simple gauge of how far a country can use force against another, or threaten to use it, and is the fifth measure of power used. The US is once again in the top rank here, and it also has military bases in over 50 countries. By contrast, China has bases in just three other countries (Djibouti, Myanmar and Tajikistan).

Even if much US military spending is, in reality, more of an indirect subsidy to the domestic US economy and corporations, or is on equipment with inflated prices, its total spending of a huge $778bn in 2020 still gave the US plenty of scope to project power. This sum was more than three times bigger than China’s and twelve times bigger than Russia’s. The US lead over other major countries in military spending has increased in the past two years.

Power outcomes

Each of the five factors has some limitations regarding its accuracy or coverage. But together they give a good summary of power and are available for a large number of countries. This measurement of global power is endorsed by how the results for the top 20 countries include the five permanent members of the UN Security Council, all of the G7, and most of the G20 countries.

A country may have a high score on one component and very little on another, but all except a few countries in the world have a negligible score on all of them. The US has an index score of 93.2, with China well below in second position at 37.7. Only six other countries have an index score above 10.0. More than 150 countries score less than 1.0. This picture of the extreme hierarchy of power is a challenge to anyone who uses the term ‘international community’!

 

Sources & notes: See the first chart for details.

This calculation of power depends upon individual country values and does not consider the effect of alliances between countries, or factors that are not as easy to quantify, such as cultural influence. If included, these would only add to the power of the US and generate a more towering image. Consider NATO, for example, which accepted that the ‘North Atlantic’ security region extended into Afghanistan, the first US target after September 2001. Or consider how US social media companies dominate the Internet, how the world’s youth wear baseball caps, like, backwards, and how even India’s massive film industry calls itself ‘Bollywood’.

What next?

The US is worried about the rise of China’s economy, although US power extends much further than a simple economic measure would suggest. A look at the power index for the major countries over the past two decades shows how China has also built some non-GDP dimensions of power, notably in military spending, international banking and the ownership of foreign investment assets.

 

Sources & notes: See the first chart for details.

In recent years, China dislodged the UK in number two spot on this ranking of world power. The UK is the world’s fifth largest economy, but has its status boosted by its role in international banking. That reflects its position in world finance, although the form that this takes is also changing with the rise of China and other Asian countries, and the relative decline of European economies.[13] The more that international business grows outside of the traditionally dominant group of countries, the less important are the rules that they impose for how the world economy must work.

The US sees the rise of China not just as unwelcome competition, especially in the technology sphere, but also as a serious future threat to its hegemonic status, one that must be dealt with today. Other countries closely linked to the US, and especially other Anglo members of the ‘5 Eyes’ spying network (UK, Australia, Canada, New Zealand) are in a similar position, because they have been an integral part of a system that has dominated the world since 1945. That is why the rise of China inevitably becomes a geopolitical issue.

Some countries in Europe, particularly Germany, have a different perspective. Politically they are pro-US, and they are also economically cautious about China. But they would also like to have an alternative to relying solely upon the US, or US permission, whether that is for technology, for energy, or for other vital supplies. They are right to be concerned that the US is inclined to unilateral policy moves that can go against European interests. That remains true under Biden, although his administration stepped back from its former hard stance against the completion of the Nord Stream 2 gas pipeline from Russia.

Not surprisingly, China has responded to the US policies over the past decade, and the risk that as a result of these policies it could be pushed to the edges of a world economy controlled by hostile countries.[14] A key part of its response has been to press ahead with the massive trade and investment programme begun in 2013: the ‘Belt and Road Initiative’. This involves more than 130 countries, mainly in Asia, Europe and Africa, but also extending into Latin America. Faced with US sanctions and political manoeuvres, China is building up a network over which the US and its allied powers have far less control.

These developments will foment divisions in the world that every country will have to deal with. In the next few years, we will live in interesting times as the established powers led by the US fight to maintain their domination.

 

Tony Norfield, 14 September 2021

  

APPENDIX

 

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[1] This article updates my analysis of September 2019, where I showed that the Index of Power had put China in #2 position. See here.  The Index calculation here adds a country’s foreign portfolio assets to its direct investment assets, to get a better measure of its total foreign assets. (Previously, I only counted FDI, but I have since found good data on portfolio assets.) It also makes some adjustments to eliminate possible double counting of intra-China relations between China and Hong Kong, which are treated as separate countries in all official data. See the Appendix to the article for more details.

[2] For example, the US-China Economic and Security Review Commission has issued annual reports since 2000. Its December 2020 report was nearly 600 pages: https://www.uscc.gov/annual-report/2020-annual-report-congress

[3] Sources for GDP and other data used are given in the Appendix to this article. The US share of the world economy has fallen from 30% in 1990 to 24% in 2021.

[4] The former institutions, or its predecessor, the GATT for the WTO, emerged from the post-1945 political realignment led by the US. The President of the World Bank is almost always a US citizen, while the Managing Director of the IMF is always a European. The WTO has had a more diverse list of Directors General. Decisions by each institution are rarely passed if the US disagrees, a result helped in the case of the IMF by a voting allocation that always enables the US to block any IMF action.

[5] GDP numbers can be calculated in various ways. Here, the nominal value of GDP in a single currency is used to compare countries.

[6] In standard official statistics, ownership of 10% or more of a company in another country is considered foreign direct investment. Ownership of less than 10% of the company’s equity is considered a foreign portfolio investment, as are holdings of foreign debt securities. These are all added together here to give the measure of a country’s total foreign assets.

[7] Large corporations, usually from rich countries, can also profit from their commercial domination of producers in other countries via so-called supply chains, for example, Apple’s relationship with its suppliers, or western fashion companies getting their products made in Asian countries. However, these relationships are difficult, if not impossible, to measure.

[8] One study shows, for example, how a nationality-based measure could greatly increase the registered US and other major country holdings of bonds and equities in particular countries. These holdings are under-estimated by the usual residency-based measures in official data, as the residency can also be a tax haven. See pages 44 and 48, especially, of: https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_2019118_Revised.pdf

[9] This is because the data I use measure total outflows from a country, which should include the funds first sent to tax havens before being resent elsewhere. However, the ‘round tripping’ of funds to escape tax would not be counted properly. For example, if US investors sent funds to a company registered in the Cayman Islands for the purpose of investing back in US assets, that first flow would appear as a foreign asset of the US when it is not.

[10] The euro’s share of global FX markets is divided up among the 19 euro country members according to their relative GDPs. Germany has the biggest share of that, followed by France, Italy and Spain.

[11] Note that the total shares of all currencies add to 200% because there are two currencies in each foreign exchange deal.

[12] Less surprisingly, the separate Chinese currency of Hong Kong also has only a small role in world FX trading. Its currency value is tied very tightly to the US dollar’s.

[13] See Tony Norfield, The City: London and the Global Power of Finance, Chapter 9 and the Afterword to the paperback edition, Verso, 2017.

[14] For a discussion of these topics, see my articles ‘Racism & Imperial Anxiety: US vs Huawei’, 16 April 2019, here, and ‘China and US Power’, 14 July 2020, here, each one on EconomicsofImperialism.blogspot.com.

The Lebanon Complex

In the wake of the devastating explosion in Beirut, the western media has had an almost universal response. That is to focus on corruption and incompetence in Lebanon’s ruling groups and to demand change. Lebanon’s populace is also exasperated with the political elites, and many protestors have even threatened to kill them. But an examination of Lebanon’s political system shows not only how it has been shaped by its former colonisers; its workings also follow from the limits that imperialism today places on economic and political development.

Confessional modes

Lebanon’s political system falls outside of the standard democratic model lauded by the Anglosphere, because there is an allocation of political positions according to the different religious groups in the country. Yet, looking a little more closely at the reality of the former model, one will find how the middle classes manipulate the system in their favour, how it depends on mutual favours, how rich families have multi-generational power and how they have legions of hangers on. But different strokes for different folks, so let us consider the evolution of Lebanon’s confessional one.

This mode of having a government shared out among different religious groups has a history dating back to the first half of the 19th century.[1] Lebanon was then a minor province of the Ottoman Empire and made up of a number of different religious communities, principally Maronite Christians but also Islamic sects. There were clashes between such communities in the Empire, sometimes ending in bloodshed, even massacres, and religious labels often fundamentally confused what was really a class struggle, particularly between peasants and landlords. Being aware of the different groups, the Ottoman’s policy was essentially one where people could follow their own religion and were left alone, as long as they paid their taxes to the Sublime Porte in Constantinople (later called Istanbul) and didn’t cause trouble.[2]

In May-June 1860, a massacre of Christians in Lebanon was the pretext for European powers to get involved and to take advantage of the declining Ottoman Empire. In an early version of today’s imperial hype of ‘responsibility to protect’, the Europeans, especially France, put pressure on the Ottomans to grant Mount Lebanon special status. France had interests in the Eastern Mediterranean region and had already developed links with the Catholic Maronites in Lebanon.[3]

A conference of European powers and the Ottoman Empire met in September 1860 to determine how Lebanon should be governed. The outcome was to create an autonomous sanjak or province of Mount Lebanon, with a non-Lebanese Christian governor chosen by the Ottoman sultan, assisted by a 12-member council chosen on a confessional basis. This was under the protection of the six powers – Britain, France, Russia, Prussia, Austria and Turkey. This new ‘autonomous Lebanon’ excluded Beirut, Tyre and Sidon on the coast and the Bekaa Valley to the East.

After some debate, in 1864 the 12-member council was amended. Instead of each of the six main religious groups having two members each – which under-represented the Maronites, who made up the majority of the population (perhaps 60% of the total)[4] – the Maronites were now to have four seats. Three seats were allocated to the Druze, two for Greek Orthodox Christians, one for a Greek Catholic, and one each from the Sunni and Shia communities. This gave the Christians a majority of 7:5, as well as a Christian governor. It also set the course for a sectarian representative system in Lebanon, rather than a system being based on political leaders chosen by the whole country in a democratic vote.

Political reallocation

There was a problem with France’s new pied à terre of Mount Lebanon. It was too small to be economically viable and even the Maronites, although happy to be in a majority, were concerned that there might be shortages of food and little room for development.[5] Feeling ever so free to reorganise somebody else’s land, like other colonists, France later dealt with that situation when it joined the British in carving up the Ottoman Empire.

France gained a Mandate from the League of Nations after World War One to rule the former Ottoman regions of Lebanon and Syria. Being worried about the viability of Mount Lebanon, and also worried about resurgent Arab nationalism in Syria, it decided to expand Lebanon at Syria’s expense. By adding the Beirut, Sidon, Tyre and Bekaa regions to Mount Lebanon, the geographical Lebanon we know today was born as Le Grand Liban, or Greater Lebanon. This reduced the numerical preponderance of the Maronites and other Christian groups versus the Muslims, but that was an easy price to pay when you could also fix the politics.

In 1926, France imposed a constitution for Lebanon that set up a bicameral parliament and a president. Seats in parliament and in the cabinet were distributed on the basis of religious affiliation: the president was always to be a Maronite, the prime minister a Sunni and the president of the Chamber of Deputies a Shia. There would always be a Greek Orthodox and a Druze member of the cabinet, while the Maronite president had the right to choose the prime minister.

So far so good for the French, but it was far from a lasting fait accompli.

Economic and political evolution

Arab nationalists in Syria and elsewhere opposed French control of Lebanon. Just as importantly, in Lebanon there was discontent with France’s limits on what the government could do and with whom it could have political and economic relationships. What made this troublesome for France was its weak position by the 1930s, when it had little to offer, while within Lebanon there was a growing cooperation between the Maronite and the Sunni elites.

What brought the latter together was a joint interest in developing commercial and financial relationships with other countries. Even the ‘Greater Lebanon’ was still only a very small state, with few natural resources and a tiny population of less than one million people. It was never going to be a base for significant industry or agriculture. However, Lebanon had several key ports, especially in Beirut, was well positioned on the eastern Mediterranean and had long been a trading centre with financing available. The Maronite elites had traditionally looked westerly, while the Sunni merchants had stronger relationships in the Arab hinterland. France had played a useful role for them both as a sponsoring power, and France had better ties with the Maronites, but they would both be open to other deals.

This came to a head by the early 1940s, prompted by the disruption of the Second World War. Lebanon got a version of independence from France in 1943, and the ‘Free French’ who had invaded Lebanon in 1941 to oust the Vichy regime left Lebanon in 1946 under pressure from the British.[6]

In 1943, a National Pact was agreed. This was a version of earlier deals in which the Maronites held on to the main sources of political power. The 1943 Pact gave the Christians a slightly lower 6:5 ministerial advantage, but still an advantage despite Christians no longer being a majority of the population. The previous rule was kept that the president was to be a Maronite and the prime minister a Sunni; the parliamentary speaker was to be a Shia. The wider political agreement in the Pact was that the Christians would no longer look to France and Muslims would not look to Syria or to Arab union. Ties with the west and with Arab states were allowed if Lebanon’s independence were recognised.

This continuing advantage of the Christians might look anomalous, but the Pact signalled the fundamental

‘unity of the Christian and Muslim [mainly Sunni - TN] members of the commercial-financial bourgeoisie … By working together in an independent Lebanon, the Muslim and Christian bourgeoisies could build a trading and banking centre which would serve as an entrepôt for the West and the Arab world.’[7]

It was in the Arab bourgeoisie’s interests to keep Christian majority rule. This was both because the ability to pursue their common interests with the Christians might otherwise be threatened, and also because increased Muslim representation, including more for the Shia, would have limited the Sunni control of state institutions. This had the desired effect. For example, the Sunni poor tended to see the rich as only the Christians, and they kept to an Arab/Muslim loyalty, rather than a class one. The Christian-dominated state and President in Lebanon were more likely to be the focus of their discontent, not capitalism or their own confessional leaders.

Some redistribution, on confessional lines

While the confessional form of government and political authority helped to hide class divisions, it also had a downside for the different ruling elites. They now had to deliver for their particular communities, and any inter-communal conflict would also put them on the spot: ‘what are you doing to defend us?’ To make the system workable, there had to be agreement between the different groups on sharing out jobs, privileges and influence, and to make sure that those in the weakest position would not cause trouble. This was reflected in the National Pact of 1943, and also in the various other forms of agreement that came after.

In practice, this still meant a strong position of the Christians, especially the Maronites, given their economic prominence. However, the Maronites depended upon the presence of other Christian sects to add to their number, and they too saw that a deal with the Muslims was essential.

On the Muslim side, the Sunni group was in the most favourable economic position. They had done relatively well in the Ottoman Empire and remained probably the largest of the Islamic sects up to the 1970s. The Shia, the second largest Muslim community up to that point (after which they probably outnumbered the Sunni) tend to be lower down the economic scale, and have made up most of the poor in rural, suburban and city areas. At least partly as a result, they have been the most under-represented in Lebanon’s political system. This is not saying that every Sunni is rich and every Shia is poor, but the characterisation holds for each group as a whole.

The result of this political evolution was a peculiar ‘welfare state’ managed largely through the different confessional groups. This is the origin of what the western media likes to disparage as ‘corruption’, but is the type of government that arose in an ex-colony that was unable to create a single, or a more united ruling class to lord it over the rest of the population.

No escape from the imperial environment

Lebanon had a prime position in the regional economy as a commercial and financial centre after the Second World War. Heading into the post-war boom, what could possibly go wrong? It turned out that the delicate balance of internal forces was easily disrupted even in the absence of direct colonial power, both by external forces and by internal ones. These combined to produce a bewildering array of multi-faceted and changing alliances – something that one might have expected, given the disparate nature of Lebanon’s domestic political groups that were also in the process of changing. This article will not attempt to cover all these issues, but to discuss only the most important ones.

On the external side, a very significant event for Lebanon was the turmoil caused by the big powers setting up the state of Israel in Palestine in 1948, and Israel’s expulsion of Palestinian refugees.[8] Broader events in the Middle East region likewise had an impact on Lebanon. For example, pro-western Christian President Camille Chamoun did not break relations with the French and British who, along with Israel, had invaded Egypt in the Suez adventure of 1956. He also seemed to be open to US and British plans for an anti-Soviet military alliance, the Baghdad Pact set up in 1955. In 1958, he opposed Lebanon joining the newly created (but short-lived) United Arab Republic of Syria and Egypt, and he invited the US to intervene with troops in the 1958 crisis that is sometimes called Lebanon’s first civil war. The Maronites were worried about the security of their position in the country, while at the same time going against a lot of Muslim opinion.

Together with the former ‘external factors’ – the quotation marks reflecting the more-than-usual artificial nature of country borders in the Middle East – Syria, Saudi Arabia and, after the 1979 revolution, later Iran, also had interests in Lebanon.

Palestinian refugees and repercussions

More than 100,000 Palestinian refugees went across the northern border to Lebanon in 1947-48; many more followed in later years, particularly after the war in 1967. This influx of mainly Muslim refugees was a problem for a country with less than 1.5 million people in 1948 and still only around 2.5 million by 1975.[9] Apart from being an economic burden, this further exacerbated Christian worries about Arab nationalism. As Palestinian militants fought back against their dispossession by Israel, this also made other Lebanese communities, particularly those in the south of the country, fearful that Israel would attack them too.

By the mid-1970s, the results were toxic, and also not entirely predictable. Many Shia in southern Lebanon resented the presence of Palestinian fighters and one group, the Amal Movement, principally made up of Shia, turned against and attacked them in 1976. However, Maronite forces were the main opponents of the Palestinians and their armed groups, the most important of which was the Palestinian Liberation Organisation (PLO).

The principal Maronite political group was the Phalanges Party. It started as a paramilitary youth organisation in 1937, modelled after the Spanish and Italian fascist parties, and had a version of Lebanese nationalism that was opposed especially to pan-Arabism. It came to greater prominence from the 1950s. Until the 1980s, it ran the most organised militias in Lebanon, fighting both Palestinian and leftist groups. Its record shows how it gained a gruesome expertise in large-scale killings, with implicit or explicit help from other forces.

Events in Lebanon often have a murky chain of causation and even outcome, and there are sometimes plausible claims of ‘false flag’ attacks or assassinations to provoke a response between different armed groups in Lebanon. However, there is little dispute about the Phalange militia being involved in the 1975 bus massacre that killed 27 people and wounded 19, mainly Palestinians but also Lebanese. Many writers have even regarded this as the start of the prolonged 1975-1990 civil war.

Palestinians in Lebanon did not only face the Phalangists. In 1976, Syrian troops entered Lebanon on the invitation of the Lebanese president, and shortly began operations against the PLO whom they blamed for destabilising the country. In August 1976, supported by Syria, Maronite forces attacked the Tel-al-Zaatar Palestinian refugee camp in East Beirut and murdered 1,000-1,500 civilians.

The Maronite militia had been supplied with weapons and military advisers by Israel, which was pleased with the result. This relationship continued in an even more outrageous crime in 1982; one that has had a more prominent place in the history books, so it need only be noted briefly here: the massacres at Sabra and Chatila.

In 1982, after their second invasion of Lebanon (the first was in 1978), Israel moved to eliminate the Palestinians in Beirut, targeting areas where they claimed PLO fighters were based.[10] Principally, the Israelis used their Phalangist allies for this. The direct Israeli action was shelling the Sabra refugee camp and the Chatila neighbourhood, blocking off exits and illuminating the area with flares, then allowing the Phalangists to go to work. Killing and massacre are words too clinical to describe the murder, mutilation, gang rape and torture that resulted. From 16-18 September, anywhere from 1,400 to 3,500 people died, overwhelmingly civilians, both Palestinians and Lebanese Shia.[11]

Israeli intervention in Lebanon was undoubtedly a critical factor in the fracturing of Lebanese politics, but it was far from being the only one. Israel managed to engineer the expulsion of the PLO from Lebanon, but it was unable to cement a lasting alliance with the Maronites, who themselves were losing political ground in the country. The result of the 1982 episode of war, after Israeli troops eventually pulled out (except for their continued occupation of the Shebaa Farms area), was the increased presence of Syria and the rise of Hezbollah.

Syria

The rationale for the Syrian government’s intervention in Lebanon was its fear of regional disruption caused by conflict with the Israelis, including in Syria. This was together with its concern about growing Sunni influence via the PLO. Syria backed anti-PLO Palestinian and Lebanese groups and sought more influence in Lebanon. Syria’s political system, like Lebanon’s, was an uneasy compromise between rival groups. But in contrast to Lebanon, it was one that had resulted in a stronger central government.

From 1976 to 2005, Syria had more than 20,000 troops in Lebanon, and initially the Arab League endorsed these as a peacekeeping force. Although Lebanon had asked Syria to leave in 1986, Syria’s presence gained some legitimacy by 1991 and the two countries signed a treaty and a security pact. These gave Syria responsibility for the defence of Lebanon from external threats, while Lebanon promised that it would not be a threat to Syria. Over time, however, Syria’s military presence in Lebanon came to be opposed both by internal and external forces, and Syrian troops pulled out in 2005.

The Taif Agreement

Syria’s military exit was its delayed response to the 1989 Taif Agreement. This was a plan negotiated in Taif, Saudi Arabia, for ending the civil war and the implementing political changes in Lebanon. As one might have expected, a number of other countries were involved in drawing up the Agreement, otherwise known as the National Reconciliation Accord. These included Saudi Arabia, Egypt, Syria, France, Iran and the US.

The Agreement took away some of the Lebanese (Maronite) President’s powers, enhanced the power of the Sunni prime Minister and, a little more in line with demographic reality, gave the Christians and Muslims an equal number of seats in the Chamber of Deputies. This abolished the advantage previously favouring Christians, but they were still over-represented. Various studies have put the Christian share of the population at well below 50% at that point, and still lower today, partly due to emigration, but there has been no official government breakdown of the population by religion since 1932. Some statistics are just too dangerous, because they might contradict the (only?) political deal that the ruling elites find manageable.

One other important aspect of the Taif Agreement was how it called for the disarmament of the many armed groups within Lebanon. Such militias were rife, since a divided bourgeoisie does not often have a national army it can rely upon. However, there was an exception to the rule on militias: Hezbollah.

Hezbollah

If you were religious, it would be difficult to think of a better name for your political group than the ‘Party of God’. Due to Hezbollah’s important role in fighting Israel from 1982 and its wider significance in Lebanon, especially among the Shia community, the Taif Agreement allowed it to keep its arms as a ‘resistance force’.

Hezbollah began after 1979 as a rival to the older Amal Movement in southern Lebanon and was backed by Iran after the Islamic revolution of that year overthrew the Shah. It grew to have support in many areas of the country, with the key points of its 1985 manifesto gaining resonance: to expel the French and Americans from Lebanon, to bring the Phalangists to justice and to allow people to choose the form of government they want. Naturally, it also called on people to choose an Islamic government, but that did not stop it getting support from people who did not want one.

Together with Amal, Hezbollah today represents most of the Shia in Lebanon, but just noting that would greatly underestimate its political clout. It is a key player in Lebanon’s parliament, including having alliances with other parties, even Maronites; it has the most effective military force in the country and it runs an extensive social welfare programme in Lebanon, including hospitals and educational facilities.

In military terms, Hezbollah has many claims to fame, although it has not said that all the things attributed to it were its responsibility, and they may not be. Notable are: the April 1983 suicide bombing of the US Embassy in Beirut, with 17 US dead, including two senior CIA officers; in October 1983, more than 240 US marines and 58 French paratroopers were killed by a truck bomb in Beirut; in March 1984, the kidnapping of William Buckley, CIA station chief in Beirut (he died in captivity in June 1985). There were many more.

Perhaps the biggest episode was the war with Israel in July-August 2006. After Hezbollah fighters crossed into Israel and killed or imprisoned a number of Israeli soldiers, Israel bombed southern Lebanon and Beirut and began the massive destruction of civilian infrastructure, including schools, roads, bridges, mosques, churches and medical facilities. Over 1,000 Lebanese were killed, the vast majority civilians, more than 4,000 were injured and a million people were displaced. Israel’s land, sea and air blockade on Lebanon lasted until September 2006.[12]

Despite the destruction in Lebanon, Hezbollah gained political ground both in Lebanon and outside. It had managed to survive, not to surrender, and was able to inflict embarrassing losses on the much more powerful, US-funded Israeli forces. This has made Hezbollah difficult for Israel and western powers to deal with. The US and the UK have declared that Hezbollah is a ‘terrorist’ organisation, and the EU has used that term for its military wing. But its prominent status in Lebanon has been unchanged, and in recent years it has used its military experience to fight against ISIL both in Syria and in Iraq.

Saudi and Iranian money

While Israel’s mode of influence in Lebanon was via Christian politicians, as well as via direct military attacks and intervention, Saudi Arabian and Iranian influence has been through the Muslim community, which makes up more than half the population. The two biggest Muslim groups in Lebanon are the Sunnis and the Shia, roughly equal in size, and the principal links have been Saudi-Sunni and Iran-Shia.

Saudi influence in Lebanon has been led by money, including bribes. Along with some other Gulf states, Saudi Arabia has been an important source of subsidy for the Lebanese economy, helping to finance projects, including reconstruction after the 2006 war with Israel. To that extent, it has been of some benefit to all Lebanese, not just Sunnis, but this subsidy has been under threat in recent years. This is both because of Saudi Arabia’s anger at Iranian and Syrian involvement in Lebanon and because of lower oil prices reducing Saudi revenues.

Iran has far less available money than Saudi Arabia, but has also had a significant role in Lebanese politics. It is able to be far more effective in providing not only military supplies and training, but also food aid and other assistance. The western media focus is on Iran’s support for Hezbollah, but this should not be overstated. Just as the Saudis cannot entirely control the politics of the Sunnis, Iran is also limited in what it can do. Compromise between different Lebanese factions is a necessity that all domestic players accept, whatever the pressures may be from their external sponsors.

Lebanon’s economy

Data on Lebanon’s economy are patchy and unreliable. The war in Syria from 2011, which led at one point to more than a million refugees fleeing to Lebanon, has added to the data problem. But one has to deal with what is available. Here I briefly examine some balance of payments data that throw more light on Lebanon, rather than focus on the latest period of crisis that has seen inflation accelerate to around 90% and the economy in a state of collapse, even before the explosion at Beirut’s port.

At first sight, the broad patterns in these data are consistent with what one would expect from a small economy that was very involved in international trade. For example, exports and imports of goods and services are each a large share of GDP. However, the average for exports from 1990-2010 was a bit over 30% of GDP while the average for imports was nearly 60%.[13] This massive gap of close to 24% of GDP is unusual, and it was at close to the same rate in later years. The total of other factors on the current account did not reduce this gap in ‘current’ payments. Although one, remittances from expatriate Lebanese workers, saw significant inflows, others, including payments on debt servicing, saw big outflows. This implies – if the data are at all indicative of reality – that there had been a persistent and large net inflow of funds into Lebanon on the country’s financial accounts.

These net financial inflows tally with the sharp rise in Lebanon’s foreign debt to around 150% of its GDP. They also reflect the large scale of financial support for Lebanon from Saudi Arabia and others that are not fully documented. Part of this support has come in the form of foreign investment, especially into Lebanese real estate; other money has come in the form of deposits in Lebanese banks, including the central bank. Media reports in recent years have noted a flight of money from Lebanon. Saudi Arabia’s funding of Lebanon’s balance of payments, unwittingly or not, will have made this exit less costly for Lebanon’s capitalists.

Conclusion

Lebanon highlights many features of imperialism today. Despite its colonial past and a system of government that was bound to exacerbate communal tensions, it might still have managed to carve out a niche for itself and become a relatively prosperous trading centre in the Eastern Mediterranean.[14] But that prospect was crushed by the geopolitics of the region, from the creation of the Israeli state, to the interference of the major powers, to the impact of crises in surrounding countries as they too tried to forge some kind of future.

It is especially galling to have media pundits cite ‘corruption’ in Lebanon as the problem when the country’s history has been shaped by outside forces, and when the choices it faced for development meant fitting in with the colonial or imperial set up.

The imperial focus today is on Hezbollah. It has provided Lebanon with the only effective force to counter persistent attacks from Israel, and also runs a much-needed welfare system. That is bad enough for ‘western’ opinion; worse still are its links with Iran and Syria – other countries that do not do what they are told.

So, never letting a crisis go to waste, in the wake of the devastating explosion in the port of Beirut we find that curbing, or eliminating, Hezbollah’s role in Lebanon is a major imperial objective, one shared by both Saudi Arabia and Israel. This is the rationale behind their calls for ‘reform’ in Lebanon, and would appear to be a condition for giving the country anything more than minimal aid.

All citizens of Lebanon are angry at the political regime, and they have wanted to change it for decades. But there is no chance of them being able to decide on a new system without external pressure. Imperialism today presents many countries with problems that cannot be resolved. Lebanon is one of them.

Tony Norfield, 26 August 2020

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[1] A valuable source for historical and more recent information is Samir Khalaf, Civil and Uncivil Violence in Lebanon, Columbia University Press, 2004.

[2] Taxes were higher on non-Muslims, yet they were also able to hold relatively prestigious positions within the Ottoman administration.

[3] The Maronites were a Christian sect that welcomed the First Crusade in 1096. Much later, they adopted Catholicism and the authority of the Pope.

[4] There are conflicting accounts of population sizes for the different groups, but an objective of the French was to maintain a significant grouping of Christians in any version of Lebanon. The Maronites need not be the majority of the population, however, and being in a minority would make them more dependent upon French support.

[5] There had been a famine in Beirut and Mount Lebanon with up to 200,000 deaths in World War One, due to a blockade, the Ottomans requisitioning food supplies for the army and a swarm of locusts devouring crops.

[6] The French had arrested Lebanese ministers in November 1943, but the British later forced their release. The British had some support from Muslims and Druze, and were concerned to balance out their other plans as well as undermining French influence in the region. There were more French attacks on attempts at independence in both Lebanon and Syria, but the British finally engineered a French withdrawal from both in 1945-46. France retaliated against the British by backing the Zionist militias in Palestine.

[7] Michael Johnson, Class & Client in Beirut, Ithaca Press, 1986, p118.

[8] The terror programme of Zionist militias began even before the new state was established in May 1948. Israel’s expulsions, and its pervasive land grabbing, also continued well after 1948. Most Palestinians fled to Jordan, fewer to Lebanon, and fewer still to Egypt. By September 1949, the UN estimated there were 711,000 Palestinian refugees from Israeli-controlled territory. Israel has prevented their return.

[9] Lebanon’s population rose to around six million by 2018. That includes nearly 200,000 Palestinian refugees and roughly a million refugees from Syria after 2011; it excludes the many Lebanese who had moved to other countries.

[10] Apart from attacks by missiles and aircraft, Israel has invaded Lebanon on many occasions – notably in 1978, 1982, 1993, 1996 and 2006. It has not only seized land across Lebanon’s southern border but also bombed and invaded Beirut.

[11] See Lebanon’s Legacy of Political Violence, International Center for Transitional Justice, September 2013, for more details of this and numerous other events in Lebanon from 1975 to 2008.

[12] Lebanon’s Legacy of Political Violence, pp83-88.

[13] Note that trade statistics data do not measure value added, just the value of the goods and services exported and imported, whereas the GDP data measure value added. This can mean that entrepôt centre countries might have exports or imports that are a very large share of GDP. The excess of imports over exports is nevertheless still a gap that has to be covered by other inflows on the international balance of payments.

[14] Back in 1981, I visited Beirut briefly as part of a business trip to the Middle East. I had an interview with a businessman who knew about the demand for certain products both in Lebanon and also more widely in the region. The interview was conducted to the sound of gunfire down the street.

Debt Update

For the first time in a decade, the ratio of debt to GDP fell back in 2018 for both advanced and emerging market economies. It nevertheless remains high, much higher than at the start of the 2007-08 crisis, and has also continued to rise in some major economies.

The first chart shows the global picture, broken down into the two main country groups counted by the Bank for International Settlements. The ‘advanced’ countries are basically 22 rich ones; the ‘emerging market’ economies are 21 others.* Note also that the data cover the outstanding credit advanced to the non-financial sector, including non-financial corporations, the government and households.

Data for the ratio of debt-to-GDP are given in the next table. It shows that Japan remains a basket case, and its debt ratio has continued to rise. France looks to be in one of the worst positions among the major capitalist countries, with its debt ratio also rising and going above 300% of GDP. While the debt held by the French government has held steady, it has grown among households and corporations. This will keep President Macron and the Gilets Jaunes busy. Elsewhere among the euro countries, the debt ratio has been falling, notably in Germany. 

Total credit to the non-financial sector, 2013-18 (% GDP)

	2013	2015	2017	2018
Advanced economies	268.4	266.5	277.3	265.5
Emerging market economies *	153.3	171.2	191.8	183.2
US	247.4	247.2	250.5	249.8
Japan	363.4	362.0	370.9	375.3
UK	267.7	267.1	283.1	279.3
China	212.7	239.3	253.4	254.0
South Korea	220.3	232.0	231.2	238.2
Germany	192.3	185.2	178.3	175.7
France	281.9	300.8	310.0	311.0
Italy	253.5	270.6	259.7	252.6
Euro area average	264.0	271.3	262.8	258.2

Brexit Britain saw the debt ratio fall a little in 2018, but the odds must be for a further rise of indebtedness this year and next. If likely PM-to-be BoJo can waste so much money as London mayor – from water cannons to garden bridges, buses and a cable car – just think what an empowered narcissist’s plans could be!

China’s debt ratio has risen among the fastest in the past decade or so. Yet the total, at close to 250%, has stabilised in the past year or so and is now similar to that in the US. Ironically, the breakdown shows that ‘communist’ China’s government debt ratio at just below 50% is only half that in the ‘free market’ US, where it registers close to 100% of GDP.

China’s household debt is also lower than in the US, but its non-financial corporate debt is much higher. Nevertheless, around 100% is a common government debt ratio for major countries. Even Germany’s is only just below 70%. So these data would suggest that China has plenty of room, if it chose, to boost its government debt and bail out any corporates in trouble (quite apart from the ability to use its $3.1 trillion of FX reserves).

Tony Norfield, 18 July 2019

Note: * The BIS emerging market economies are: Argentina, Brazil, Chile, China, Colombia, the Czech Republic, Hong Kong SAR, Hungary, India, Indonesia, Israel, South Korea, Malaysia, Mexico, Poland, Russia, Saudi Arabia, Singapore, South Africa, Thailand and Turkey.