Experts discuss challenges to economic freedom in Lebanon

Analysts discuss the findings of the recent Fraser Institute report on economic freedom and what it means for Lebanon. (The Daily Star/Mohamad Azakir)

BEIRUT: With its liberal business environment and vibrant private sector Lebanon should have a high degree of economic freedom. But the country still suffers from a lack of legal protection, access to sound money and regulation of credit and labor, according to the Fraser Institute.

The Canadian think tank, in collaboration with the Lebanese Economic Association, held an all-day workshop in Beirut at the Golden Tulip hotel in Jnah Saturday, in which they discussed the results of their annual report and what they believe it means for Lebanon.

“Lebanon has a weak but unlimited state. You want a strong but limited state,” said Tom Palmer, vice president of the Atlas Network in Washington, DC. Before an audience of academics and economists (including former labor minister Charbel Nahhas), he described how the countries that scored highest had governments that were strong and transparent while encouraging free enterprise.

Scoring highest in this year’s index are Hong Kong, at 8.69 out of 10, followed by New Zealand (8.36), Switzerland (8.24), Australia (7.97), Canada (7.97), Bahrain (7.94), Mauritius (7.9), Finland (7.88) and Chile (7.84). Coming in with the lowest scores are Venezuela (4.07), Myanmar (4.29), Zimbabwe (4.35), Republic of the Congo (4.86) and Angola (5.12).

Lebanon is ranked slightly above average in the Arab world, tying with Oman for fifth place with a score of 7.6, up by .1 from last year’s report, and placing relatively high in the global context. The score of least economically free in the region went to Algeria (5.7).

According to the Fraser Institute's research, countries that are economically free outperform others in key areas, in addition to wealth, such as life expectancy and civil liberties. Having more economic freedom, believe analysts at the workshop, could help Lebanon become a more tolerant society.

“Economic freedom promotes virtues in society. When everyone is a potential customer, merchants treat people with respect,” said Palmer. “Great pioneers of religious tolerance are merchants. For them a dollar is a dollar.”

Fred McMahon, a resident fellow with the Fraser Institute, said that in countries where there isn’t economic freedom “different ethnic and religious groups” tend to “compete for government favors and monopolies.” He noted that Lebanese have been able to make far more economic gains in their adopted countries, including Canada, than they have at home.

Palmer shared two seemingly similar success stories of long-established expatriates: Mattar Salim who established in Brazil what is now the largest car rental company in Latin America and Carlos Slim, considered the richest man in the world, who made his fortune in the privatization of Mexico’s state-run mobile phone company.

“Salim Mattar made his money honestly. Carlos Slim made his money through cronyism,” said Palmer, noting that Mexico, with its telecoms oligopolies, is ranked low in economic freedom. He also urged people not to mistake capitalism (a genuine free market) for crony capitalism, a category into which much of the Arab world – including Lebanon – falls, causing it to consistently get a low ranking.

Some in the audience were critical of the group’s assessment of economic freedom, and voiced concern that this would give too much independence to the private sector and not enough government oversight.

But McMahon pointed out that Denmark has a large government, but ranks high in economic freedom due to its good standards of corporate governance and upholding the rule of law to protect all parties.

When the economic playing field is leveled, argued the presenters, people are much more inclined to deal with one another fairly and transparently, without feeling the need to resort to government favors.

“Freedom does not mean that anything goes,” said Palmer. “Some people think law and freedom are incompatible, but they’re not. The state must be subject to the same rules as the citizens. And the legal system in Lebanon is underperforming.”





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