The Political Economy of Corruption

Abstract

Lebanon is facing one of the most acute socioeconomic and political crises in history. While it was the financial center during the 1950s, 60s, and early 70s with its sophisticated banking sector, the civil war between 1975 and 1990 demolished this position. Beginning from 1990 until 2019, the Lebanese economy was slowly dragged into an economic collapse with depreciated Lebanese lira against foreign currencies, which was the preferred monetary policy. This chapter focuses on this collapse and the so-called Ponzi scheme, organized by the Lebanese central and commercial banks. It elucidates the leading cause of the issues (e.g., financial engineering, Beirut Explosion, political deadlock, economic turmoil), namely rampant corruption, from the perspective of political economy. It also discusses foreign interventions, the dominance of Hezbollah, and terror financing issues. Lastly, it sheds light on future research by providing policy recommendations for the Lebanese political economy.