It has been argued so far that the most important implication of the organic dependence of Lebanese capitalism on the rapid expansion of trade and, hence, mercantile and usurious capital is the association of the bourgeoisie’s prosperity with the supply-and-demand dynamic in ‘centre’ economies since the mid-nineteenth century. Until the nineteenth century, the interests of the dominant financial-commercial bourgeoisie in Lebanon depended on the expansion of Egyptian and Ottoman capitalism. In light of rapid industrialisation and the advent of steam navigation in nineteenth-century Europe, however, the paradigms of economic dependence shifted towards European capitalism. This is evident in the patterns of trade and commerce in nineteenth century Lebanon: whereas Egypt and Turkey accounted for more than
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half of the country’s trade in the 1830s, trade with France and England grew from 25% in 1833 to over 50% by 1910 (Saba, 1976; Fawaz, 1983:61-62; Gates, 1998; Hallaq; 2009).
The rapid expansion of European capitalism in Greater Syria can be attributed to (i) the substantial investments in industry and infrastructure during the Egyptian interlude; (ii) the expansion of the Capitulations system restricting state monopolies in the Ottoman Empire and granting European capitalists preferential access to Arabo-Ottoman markets; and (iii) Ottoman investments in infrastructure aimed at attracting foreign trade and investment (Gates, 1998:6-7; Hallaq, 2009).
The implications of the expansion of European capitalism in Greater Syria during the nineteenth century are manifold. Firstly, European industrial-capitalists expanded beyond Europe in pursuit of consumer markets and raw materials. As a result, Greater Syria’s imports grew at a faster rate than its exports as demonstrated in Figure 4.1. Secondly, European merchants’ interest in raw materials rather than industrial products discouraged the development of industries in Greater Syria and, instead, promoted the tertiary sector to the detriment of the agricultural and industrial sectors – hence, reinforcing the lowest reproductive structures.
Thirdly, diminished trade with Egypt and Turkey resulted in the demise of previously-affluent port cities such as Saida and Tripoli and the rise of new port cities associated with European trade such as Beirut. Similarly, as interest in Egyptian, Anatolian and Balkan commodities plummeted vis-à-vis manufactured European commodities, ‘traditional’ bazaars lost their glamour and the dominant class of pre-capitalist merchants receded. Instead, a commercial- financial elite emerged associated with European import/export activities. It was in this light that a dominant class of Mount Lebanon capitalists emerged in association with sericulture and, thus, engaged in lucrative business ventures with French capitalists based in Alexandria and representing established industrialists in Lyon and Marseilles (Fawaz, 1983; Gates, 1998). This shifting balance of economic interests manifests itself in the ‘relocation’ of government prerogatives from the pashas of Acre, Saida and Tripoli to the mutaṣarif in Mount Lebanon. The seat of the mutaṣarifiyya itself shifted from Beitedinne in the Chouf to Baabda in the immediate vicinity of Beirut. The city itself was a booming capital city in the making: a number of Westernised neighbourhoods expanded in close proximity to the port and, inspired by Paris, the city was re-centred around Place de l’Étoile where a modern business quarter and a national legislature were inaugurated in 1912.
Under the French Mandate, European business interests in Lebanon outgrew trade in its classic import/export form. French investments, for instance, accounted for 50% of all foreign direct
investments (FDI) targeting Greater Syria. The majority of European capital in Greater Syria was invested in the communications, transportation, financial sectors (Gates, 1983).
Prior to the declaration of the French Mandate, however, FDI was regulated by Ottoman laws which necessitated partnerships between Ottoman and foreign nationals in large-scale projects of a strategic nature. European capitalists’ need for ‘partners’ to invest in Syria and Lebanon, thus, resulted in the emergence of a class of Lebanese crony capitalists (Hallaq, 2009). In return for providing their European counterparts with the legal requirements necessary to bypass Ottoman restrictions, crony capitalists amassed large fortunes and integrated themselves into a global bourgeoisie. Joseph Moutran, a Christian entrepreneur from Baalbek, is a case in point. In the 1880s, Moutran was granted Ottoman concessions to construct the Damascus-Muzayrib railway and expand the Beirut harbour. Moutran, however, ‘sold’ both concessions to French ‘business partners’ (Fawaz, 1983:72).
Figure 4.1 - Balance of Trade in Nineteenth Century ‘Greater Syria’
Sources: Fawaz (1983:62); Gates (1998:16)
4.2.2.1 Expansion of the Financial-Commercial Sector in Twentieth-Century Lebanon
Alongside crony capitalists, a class of Lebanese entrepreneurs was developing in association with the financial-commercial sector and, thus, on the periphery of expanding European capitalism in Mount Lebanon. Travellers and historians such as Father Louis Chaykhu and
shaykh Muḥammad Al-Qāyātlī speak of the ‘merchant republic’ that had emerged in and
around Beirut in the late-nineteenth century (Hallaq, 2009).
By the turn of the century, the financial-commercial bourgeoisie had achieved dominance and its class consciousness had crystallised. It is in light of this that the ‘New Phoenicians’, a group of Francophile, predominantly-Maronite bourgeois intellectuals revived the ancient Phoenician merchant republic as a cultural-national identity for the outward-oriented, capitalist ‘Lebanon’. For them, ‘Switzerland of the East’ would no longer refer to the country’s mountainous landscape alone but, crucially, to Lebanon’s role as regional banker, tourist destination and a federation of confessional cantons. The ‘New Phoenicians’ included such prominent figures as
1825‐1865 1870 1910
Imports Exports
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Henri Pharaon, Émile Eddé, Bechara Khouri and René Busson (Gates, 1998:21-27; Traboulsi, 2007:92). The motto of the Lebanese polity became ‘importer ou mourir!’ as Gabriel Menassa exclaimed: an indication of the commitment to the outward-oriented tertiary sector.
Although the origins of Lebanese peripheral capitalism can be traced back to the mid- nineteenth century, the adoption of the most unrestrained form of capitalism and the minimisation of the state’s interventionist capacities occurred during the French Mandate and the postcolonial era. In part, the rapid expansion of the tertiary sector in Lebanon can be justified by the high profit rates, low risks and smaller investments required by financial- commercial business ventures compared to agriculture and industry (Gates, 1998).
Alongside commerce and finance, tourism witnessed a boom in turn-of-the-century Lebanon as the fortunes amassed by members of regional – especially Egyptian – bourgeoisies translated into demand for luxury estivage in Mount Lebanon and parts of Syria. As a result of this growing demand, Lebanon attracted as many as 30,000 tourists in 1937; 216,000 in 1951 and 544,000 in 1957 (Gates, 1998:16). This coincided with a recession in sericulture releasing labourers. Tourism, hoteliery and hospitality expanded in Beirut and Mount Lebanon and, thus, integrated previously-inopportune regions into the capitalist economy.
Lebanon’s financial-commercial peripheral-capitalism benefited from regional developments including the discovery of oil in the Gulf. In an attempt to exploit the opportunities arising from expanding Anglo-American investments in Iraq and the Gulf emirates, the Beirut-based bourgeoisie expanded their investments to include a state-of-the-art airport in the Bir Hassan Airfield in 1938 as well as two rival airlines: AirLiban which benefited from connections with Saudi royals, and Middle East Airlines (MEA) which benefited from Saeb Salam’s Kuwaiti contacts. Moreover, Tripoli established itself as the Mediterranean export terminal for the Iraqi Oil Company and the construction of oil refineries in Saida and Tripoli commenced. By monopolising Western trade with the oil-rich Gulf emirates in the late-1940s, 30% of the world’s gold transited through Beirut (Traboulsi, 2007:118).
By the mid-twentieth century, therefore, Beirut had established itself as a liberal example of self-perpetuating prosperity and consolidated the dominance of the financial-commercial bourgeoisie. This was exacerbated by the creation of the State of Israel in 1948 which eliminated Beirut’s most important competitors: Haifa and Acre. Beirut’s seaport and airport became indispensible for Western interests in the Gulf. Furthermore, the influx of Palestinian refugees to Lebanon allowed for the integration of Palestinian capitalists into the Beirut-based Lebanese bourgeoisie as well as the exploitation of skilled labourers (Bickerton and Klausner, 2005; Trabousli, 2007).
In 1950, the Libano-Syrian customs union was annulled reflecting the divergence between the interests of the two bourgeoisies: the Beirut-based bourgeoisie embraced its role as a hotbed for transit trade and European investment whereas Syria sought to develop its reproductive structures and, thus, introvert capital accumulation (Owen, 1976; Traboulsi, 2007).
4.2.2.2 Disarticulated Capitalism and the Disruption of Inter-Sectoral Links
It must be noted that the implications of the rapid expansion of the tertiary sector in the first half of the twentieth century were manifold. One of the most important implications is that Lebanese capitalism failed to produce a ‘progressive’ economy where the ‘developmentalist’ interventions of the state are geared towards developing reproductive structures, introvert capital accumulation and inter-sectoral linkages. Instead, the expansion of the tertiary sector corresponded almost exclusively to the supply-and-demand dynamics of ‘centre’ economies and, thus, produced a disarticulated political economy.
The extrovert orientation of Lebanese capitalism, therefore, resulted in the overdevelopment of the commercial, financial and tourism sectors at the expense of agriculture and industry. It is in light of this realisation that we can understand the regional and socioeconomic disparities and developmental differentials which have characterised modern Lebanese history.
Agriculture, for instance, was heavily restructured following the birth of ‘the merchant republic’ in the early-twentieth century. Capitalist forms of share-cropping expanded forcing landowners to seek credit for machinery, grain and pesticides from the banking sector. Moreover, agribusiness monopolies dictated farmers’ production choices and, thus, transformed agriculture into a subservient sector attending to the needs of the import/export business. The Anjar sugar industry in the Bekaa, for instance, rendered beetroot farming the only viable activity for modest farmers. Similarly, the Régie Co-Intéressée Libano-Syrienne
des Tabacs et des Tombacs established its monopoly over the tobacco crop in South Lebanon,
Jbeil and Batroun (Traboulsi, 2007:158-159).
Similarly, the financial-commercial bourgeoisie subordinated the nascent industrial sector to the import/export business sector: since the mid-nineteenth century, merchants associated with European trade competed over raw materials in demand by the European cloth industry. As a result, more than half the cotton-producing looms in Syria and Lebanon went out of business (Sharara, 1975; Saba, 1976; Traboulsi, 2007:92).
Paradoxically, therefore, the subordination of the industrial sector occurred despite its positive prospects. In fact, the nascent industrial sector could have benefited from a number of favourable conditions: (i) domestically, ‘early’ (e.g. textiles, food-processing) and ‘middle’ (e.g. cement) industries provided a foundation for industrialisation; (ii) manufactured goods
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were in-demand in Syria and oil-rich Gulf monarchies; (iii) industrialists had access to expatriates’ investments; and (iv) benefited from the support of a region-wide wave of industrialisation patronised by Egypt’s pan-Arab Nasserist regime (Gates, 1998:105; Traboulsi, 2007:158).
The subordination of agriculture and industry to the import/export dynamics of the outward- oriented tertiary sector, therefore, reflected the class dominance of the financial-commercial bourgeoisie and had little to do with economic planning or economies-of-scale considerations. This is exemplified by the pressure exerted by mandatory authorities on the Société Libanaise de Crédit Agricole et Industriel to divert financing away from agriculture and industry towards small business enterprises in finance, commerce and tourism since the 1920s.
The implications of the inaccessibility of credit and farmers’ and industrialists’ subordination to the supply-and-demand dictations of monopolistic enterprises were threefold: (i) it consolidated the sway of the agro-export bourgeoisie; (ii) forced small-and-medium landowners to sell their lands and, thus, reinforced the monopoly of large land-owning feudalists; and (iii) subordinated both sectors to the supply-and-demand dynamics of the financial-commercial bourgeoisie and, thus, preventing introvert capital accumulation and exacerbating the peripherality of Lebanese capitalism.