Lebanon’s tipping point: how the Syrian crisis is punishing the generosity of its neighbours

Syrian refugees could soon account for 30% of Lebanon's population. Its people fear it will fall back into yet another conflict.

As the Syria civil war shows no signs of abating, the hospitality of countries absorbing Syrian refugees is progressively sinking them into crisis.

"My crime is that I am a mother to my sons," Yalda said. We were sitting in the old and crumbling outhouse she calls home near Saadneyil, central Lebanon, when she told me her story. I had made my visit to the region to see for myself what the civil war was doing to its people, and I was shocked by what I saw. After her second son died in the Syria civil war, Yalda travelled with the remaining members of her family from Idlib, near Homs, to cross the border with fake identification papers. They now reside on the outskirts of a makeshift refugee settlement. Her husband has been forced to work through his severe back injury and none of her remaining three children are in education. They struggle daily to make ends meet.

While the current humanitarian crisis in Syria has been highly publicised – and rightly so – the spill over effect into neighbouring states, such as Lebanon, has gone largely underreported by the media. With no official refugee camps for the Syrian refugees, further pressure has been placed on these host communities. I saw firsthand the sheer devastation this crisis has caused Syrians and Lebanese alike, with stories like Yalda’s echoed across the country.

In the past two years, more than half a million Syrian refugees have fled to Lebanon. This number is expected to increase to one million by this Christmas. Around 4,000 refugees cross the border every week into a country half the size of Wales. This means 30% of the population in Lebanon could be refugees by the end of the year, compared to 0.3% of the population in the UK. This is the equivalent of 15 million refugees seeking refuge in the United Kingdom. I cannot imagine how we would begin to cope.

On my first day I visited an informal settlement of Syrian refugees with international children’s charity World Vision on the outskirts of a town in the Bekka Valley. The horror of the situation there is all too apparent. Hundreds of refugee families are living in dozens of makeshift tents in unsanitary conditions. As more and more refugees arrive to this camp and thousands like it, it has becoming impossible to maintain any semblance of normality. Rubbish and food scraps are collected irregularly from the overstretched local government, causing further unsanitary conditions for the refugees and their Lebanese neighbours. The work that NGOs and UN agencies are carrying out to address this is vital. Recently, World Vision has implemented WASH (Water and Sanitation Hygiene) projects in refugee camps, providing much needed toilet and shower facilities and water filtration devices.

It was just outside this community where I first met Yalda and her family. During our meeting I was struck by the resourcefulness of her three children and the senseless waste of their potential. The eldest, Sabeen, had planned to continue her studies at a prestigious Syrian University but was unable to complete her final year of study. The youngest, a boy of fourteen, was forced to work as a mechanic and take on the mantle his elder brothers had presumably once held. However, the child that struck me most was 16-year-old Fayzeh, who had dreamt of becoming a journalist before she was forced to leave her home and flee to a foreign country. This assertive, confident girl told me she had felt the need to burn all of her writings in Syria through fear they would be found by the Assad regime. She said that although still a child, the civil war had forced her to grow beyond her years. She told me about the horrors she and her family had faced living in Syria, of the senseless murder of her friends, family and neighbours.

She put in writing what was too difficult for her to say out loud: "I am a Syrian girl from Homs; Homs, the victim which has tasted the bitterness of life; Homs, bereaved of its children; Homs, the widow, the orphan; Homs which was violated". She wrote about her grief, the loss of her brothers and how her land had been abducted "I will follow in the steps of my brothers, the hero martyrs, who refused to surrender their land and their honour to those who wanted to rape it". What struck me were her perseverance, her attachment to her country and her desire to survive: "I did not give up and I will not give up".

Tragic stories like Fayzeh’s are all too often heard up and down the country. Tens of thousands of refugee children have had no education since leaving Syria. Lebanese schools are struggling to cope with the influx and many children have been unable to find a place. Aid agencies like World Vision have attempted to fill the gap through Accelerated Learning Programmes, which offer refugee children a three month burst of intensive education. But funding for this is also scarce. It is crucial that the UK government leads the way by increasing funding to NGOs and the international community so that these children can again return to education and reach their full potential. This present situation does need to be their reality.

Witnessing firsthand the suffering of Syrian refugees in Lebanon and the impact their arrival is having on Lebanese host communities; it became clear to me that greater assistance is urgently needed to prevent destabilising the country and its precariously balanced system of sectarian politics. Lebanon and the Lebanese have done a commendable job in hosting Syrian refugees. However, the situation is unsustainable and their continuing generosity is coming under strain, with reported incidents of intra-communal violence on the rise. The aid required under the new UN plan is $1.3bn by the end of this year for Lebanon alone.

This enormous amount will undoubtedly be difficult to raise, but ignoring Lebanon and leaving the country to continue on the same path will have dire consequences. Beirut is a confident and buoyant capital with glittering sky scrapers and scenic harbours lined with yachts, but in the outskirts of the city and across the country there is a real underlying fear that this country, a country which should be the jewel in the Middle East’s crown, a country where Sunnis, Shias, Alawites and Christians all live side by side, will fall back into yet another conflict. It is the children like Fayzeh, brimming with potential, who will be the ones to suffer if we allow this to happen.

Rushanara Ali is speaking at a fringe on Syria on Monday the 23rd September at 17:30 in the secure zone at Labour party conference. The event is in partnership with Islamic Relief. 

Syrian refugees fill jerry cans with water at a pump inside a refugee camp in Baalbek, Lebanon. Photograph: Getty Images.

Rushanara Ali is Labour MP for Bethnal Green and Bow and member of the Parliamentary Select Committee for Communities and Local Government.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?