Lebanon’s Former Middle Class Is Now Forced to Scavenge

They emerge from their homes at dawn, when the neighbors are still asleep but there is enough light to forage through the garbage.

Mostly elderly, the newest members of Lebanon’s scavenger army are surprisingly well dressed, Beirut residents say. These aren’t poor refugees picking out a living in strange neighborhoods, but former members of the middle class who can no longer afford to eat. They rise in the dark because they are still too proud to scavenge in broad daylight.

“Nobody wants to admit they are poor here,” one Western diplomat said. “It’s not like Africa where you have children with bloated stomachs. But many people are surviving on tea and bread.”

War Drags On

The garbage scavengers are just one of the many recent measures of Lebanon’s rapid descent into the economic abyss, a process which appears to be accelerating as the nation’s civil war drags on into its 12th year.

The economic slump sometimes seems remote in a nation where supermarkets still overflow with imported delicacies, the boutiques still display the latest Paris fashions and high-priced cars still cram the roads. But, increasingly, the luxuries for which Lebanon was once famous are now the preserve of only a tiny minority of the very rich.

The clearest indicator of Lebanon’s economic erosion is the collapse of the Lebanese pound, once one of the strongest currencies of the Middle East.

As recently as 1984, the currency traded at 5 to $1. Now, currency traders routinely offer their customers large paper sacks when exchanging $100 or more: With an exchange rate of over 100 to the dollar, even a minor transaction produces a wad of cash so huge that it cannot be stuffed into pockets or purses.

Following the 380% depreciation of the pound, a grim joke making the rounds of Lebanese officials is that the national currency is literally not worth the paper that it is printed on. A one-pound note now costs 1.1 pounds to print in London.

Menu Prices Keep Changing

The manager of an Italian restaurant in Jounieh, north of Beirut, noted that he has changed the prices on his menu five times since the beginning of the year to keep up with the runaway inflation.

“The Lebanese used to come in and order the most expensive items on the menu,” he lamented. “Now they come in and automatically ask for the cheapest meals.”

With 80% of foodstuffs imported, prices have skyrocketed for the Lebanese. Bread has gone from 6 pounds a bag to 30 pounds over the last 18 months and a bag of potatoes went up tenfold. A kilogram of meat now costs 500 pounds, about one-tenth of a civil servant’s average monthly salary.

With triple-digit inflation raging--last year it averaged 225%--a 60% wage increase in 1986 has barely made a dent for most families.

“Money that bourgeois families used to save for a very, very bad day, we are now spending,” one housewife said. “Every family has moved their savings into dollars.”

The food crisis has become so sharp that the Lebanese Forces, the militia of Lebanon’s Christians, has announced a food subsidy program of 50 million pounds to help provide staples for families that earn less than 3,200 pounds a month. This formerly middle-class salary is now worth less than $8 a week.

“There are many young babies who are prevented from having milk,” Cesar Nassar, spokesman for the Lebanese Forces, said.

The economic crisis has even changed the shape of crime. People are being mugged for food, a sweater, or even a pair of shoes. Banks have been robbed so often that they no longer routinely give their customers cash, but a check to be cashed later at a money changer.

Another result of the collapse of the pound is the so-called “dollarization” of the Lebanese economy. Shopkeepers have abandoned efforts to keep their prices up to date in Lebanese pounds. Although the practice is technically illegal, they now price goods in dollars, Japanese yen or whatever the currency of the country of origin. Even apartments and houses are now priced in dollars to guard against inflation.

Everybody’s Speculating

Another recent phenomenon is that the Lebanese man in the street has been forced into currency speculation on a grand scale. Company managers say that on pay day, workers scurry away with their paychecks to exchange them for dollars. Then they change the money back into more pounds as the month goes along and inflation has further boosted the dollar’s relative value.

Money changers sit with ears glued to two-way radios, as price fluctuations can disrupt the market on a moment’s notice. Last month, the price of the pound bounced wildly from 110 to $1, down to 82 and back to 105, all in a single day.

Office workers are so obsessed with the dollar rate, according to one businessman, that most employees spend a large portion of their workday on the phone to the bank.

“People have withdrawn their money from Lebanon, they don’t feel safe anymore,” a Christian journalist said.

Adel Kassar, president of the Lebanese Bankers Assn., said in an interview that 75% of bank accounts are now held in foreign currency, compared to 40% a few years ago.

“There is a crisis in confidence in the future of the country and, hence, the currency,” Kassar said. “The government is without resources and not getting any income.”

The loss of confidence has prompted Lebanese to move their money out of the country--$15 billion to $17 billion is now in Lebanese banks abroad, according to one estimate.

Meanwhile, the crush of unpaid loans is so great that virtually no bank in Lebanon has escaped the financial pressure.

“If they applied rigorous balance sheet principles, most of the banks would be broke,” a local economist said.

While the Lebanese economy is suffering severely now, economists said they are amazed that the collapse took so long to register. After all, even in 1982, when Israel invaded the country, the pound was still trading at three to $1.

“The collapse was not due directly to violence, but the incapacity of the state to (collect) its taxes and other income,” Joe Y. Faddzoul, a Beirut buiness consultant, said.

In 1986, for example, the Lebanese government, while emasculated politically, still spent 40 billion pounds, but took in only 3 billion. The 37-billion pound difference was made up by public-sector borrowing.

In addition, remittances to Lebanon have been sharply reduced because of the downturn in the economy of the oil-producing Persian Gulf states, where many Lebanese went to work when the civil war broke out in 1975. According to one estimate in a local journal, remittances from the Gulf have declined from $150 million four years ago to around $30 million last year.

With minimum wages now at 3,400 pounds a month--”Bangladesh standards,” according to one Western economist--a ray of hope has surfaced for the Lebanese economy.

Faced with total collapse at home, ever adaptive Lebanese entrepreneurs have created a booming export market, particularly in the manufacture of jewelry, clothes and shoes.

Factories which used to be at 20% of capacity are now working at close to 60%, but almost entirely for export.

Good Quality

A British businessman in an East Beirut hotel said he had begun importing Lebanese shoes and clothes to England and the United States.

“The quality is amazingly good,” he said.

In a fashion typical of Lebanon’s chronic lawlessness, manufacturers are also churning out copies of big-name designers’ clothing for export.

“Only the labels are the real thing,” one manufacturer said with a wink.