Raising subsidies will raise poverty to 70%

We need an immediate correction in wages to compensate for the purchasing power, which has been reduced in half since the beginning of this year, otherwise we will witness a dramatic development of double social unrest and an increase in cases of theft, violence and the like, this was explicitly stated by the economist Kamal Hamdan. He believes that there is an easiness in printing cash to compensate for part of this ability, such as “licking the coolant” and preparing for a “latent bomb” that will explode one day in the form of higher price rises, a greater acceleration in inflation, and a demand for the dollar. In his opinion, purchasing power cannot be compensated for through expansionary monetary policies, nor by targeted support, which is feared that it will turn into a tool to buy loyalties in the hands of the ruling system. Purchasing power is not compensated except by a price policy, periodic correction, and amendments to the tax system … In short, purchasing power is not replaced except by an alternative draft of the ruling.
Until August, prices inflated at a high rate, but we have not yet seen any discussion of the issue of compensating purchasing power and correcting wages, although reviving the consumer movement requires such a revival, which is economically beneficial to employers as well as workers. Given this situation, what is the actual purchasing power and inflation that must be compensated?
Before October 17, 2019, there was a different situation than after. Whoever studied successive wage corrections in past years, the following conclusion came out: An amputated wage correction took place in 2008 to accommodate people, and then a second correction occurred in 2012, from which the public and private sectors also benefited, equivalent to 25% as an average effect, but the public sector alone benefited from the wage correction. In 2017, within the framework of the series of ranks and salaries that led to an accumulative corrective effect that compensates for a large percentage of the accumulated inflation between 1996 and 2015, estimated at that time between 121% and 135%, meaning that the average correction in the public sector was equivalent to almost 100%, while the cumulative effect For the private sector, it stopped at the two corrections in 2008 and 2012, meaning that private sector employees received compensation equivalent to half of the cumulative inflation in previous years.
This remains all theoretical in light of the absence of data that allow a separation between large and medium enterprises that gave their procedures voluntary and self-corrections in order to preserve their human resources or for other purposes, and between small enterprises whose number of workers is less than 10 that hardly provided any corrections.

Nevertheless, I assert, based on the intersection of total information from several studies, that the actual average wage in the public sector is higher than the private sector, and this is what strengthened the appetite of the sects through sectarian fanaticism to exert pressure on the political class to open the door to work in the public sector because of the benefits and guarantees. Provided by the public sector.
If we exclude state employees, half of the private sector wage earners are irregular and are not registered in the guarantee, and they do not receive transportation allowances, and they do not have retirement reserves, but are left to fate. This is a situation affecting tens of thousands of workers in the private sector, including Syrians and Palestinians. Depending on the labor productivity that has been expressed in several studies, it is doubled in the private sector compared to the public sector in exchange for a lower wage level in the private sector. Unfortunately, this matter has been used as an excuse to lean the state, go to privatization, lay off surplus labor and administrative reform, which are right arguments that are intended as invalid, because the system does not create a sufficient number of jobs and work opportunities for the generations that enter the work sector annually and are pushed towards clientelism and resorting to sects and power centers. And power components for the job. This is the structure of the labor market in Lebanon.
After October 17 and the economic collapse, all the big problems in the private wage labor sector have multiplied many times over. This command is no longer carried. The monthly inflation (an annual rate over a period of 12 months ago) in 2019 indicates that in the past people had the ability to grasp their situation, but the issue of the state’s disintegration appeared after December 2019, and multiple exchange rates arose and the market price was left to expand, which was quickly reversed Unemployment and inflation rates. According to the central statistics figure, in August prices inflated by 120%, while according to the number of the Research and Consulting Corporation, prices inflated by 94% (the difference can be explained by the existence of a scientific discrepancy in the index weights between the two sources). As a result, the average wage at this stage, and with a lot of reservations about the number due to the lack of a thorough study yet, I estimate that wages lost during the past 12 months (August 2019 – August 2020) between 48% and 54% of their purchasing power (depending on the approval of No indication). To what degree is the need for a wage correction?
– There is a need for an immediate correction of wages, especially for institutions that have not implemented voluntary and self-corrections. Otherwise, we will witness an increase in social unrest in a multiplying way of violence, theft and the like.

Doesn’t the support provided by the Banque du Liban to withdraw deposits on the price of the “platform” (3900 pounds per dollar) constitute a kind of compensation for the deterioration of purchasing power?
With regard to the withdrawal of deposits on the price of the “platform”, this matter benefits those whose wages were in dollars and the employer kept paying them in local dollars. Then the employee is forced to negotiate with the banks how to withdraw this money. Some banks impose a specific ceiling for each category of accounts they hold, while others impose a unified ceiling for everyone. Such a matter mitigated the decline in the strength of the wage. However, this issue cannot be generalized, given that it only benefits a part of the wage. In fact, its harmful effects are extensive in terms of creating criticism. The ease of creating cash is similar to a “coolant lick” because it prepares for a “latent bomb” that will explode one day in the form of higher price rises and higher rates of inflation, and a latent demand for the dollar as a result of the large inflation in the size of the monetary block in pounds. Purchasing power cannot be compensated for by expansionary monetary policies. Purchasing power is only replaced by a price and wage policy, periodic correction, and fundamental adjustments to the tax system.

Currently, some of the decline in purchasing power resulting from price inflation is being compensated for by supporting the Banque du Liban to purchase basic commodities (at a price of 1520 per dollar) and food (at a price of 3,900 pounds per dollar), but it is rumored that the prices of these commodities will be freed in exchange for targeted support through the so-called Support cards, to alleviate pressures on the foreign currencies owned by the Banque du Liban that are usable and transferable abroad. What are the results of such a step?
Until now, the measures taken by the government appear to be a random hit. Each procedure has opposite effects than another. On the one hand, the idea of ​​stopping support for the three basic commodities was raised (fuel, flour, medicine and medical supplies), but negotiations are underway in order to allocate a dollar for students, another dollar for raw materials for industry, and a dollar for the food basket … The problem is that all this support is fed from a source. One: foreign exchange with the Banque du Liban. In my estimation, the commitment to support the three basic commodities, which cost several billion dollars, bearing in mind that there are no reliable and accurate figures in the value of this support, will not remain the same. My impression about these contradictory effects and their unified results, as they are financed from limited dollars, is that there is an idea that the monetary policy holders are aiming to resort to reducing subsidies and redirecting part of it through targeted methods. There is a doubt that this matter is beneficial, as long as we do not have accurate statistical data on the number of residents in Lebanon (4 million or 6 million people) and who are the poor? Who are those living below the poverty line? Or a little above it? Who are the marginalized? What are the characteristics of target families? In light of these doubts, I fear that random transfers in support policies will become more and more dependent on the continued control of the ruling system in order to renew its ability to buy loyalties by controlling the directing of this partial and targeted support to the groups that belong to it.

In the absence of accurate statistical data on the population, it is feared that the shift towards targeted support will deepen the control of the ruling system and renew its ability to buy loyalties by controlling the direction of support

Absolutely, before and after October, there was a tremendous deformation in support policies: If we search for housing support, many questions arise: Who benefited from the $ 800,000 loans, which is the highest ceiling for housing support, which was arbitrarily raised? Who are they? What is their share of support? This type was a targeted program to help the middle classes and below, but we were surprised that a large part of the support went to the children of the self and others. Therefore, in my opinion, there is a gamble to move from subsidies directed at all consumers, to other forms of support, as a result of which the total amount allocated to subsidies will be reduced by half or a third in order to prolong the gray phase (feeling the coolant, rounding the corners, spreading promises), without there being Really convinced that there is a sustainable solution. The longer the disagreements over the issuance of a law to control transfers, the definition of “heirat” programs, the continuation of coexistence with the multiple dollar prices, and the determination of the financial distress in the relationship of banks with the Ministry of Finance, the greater the costs of losses and became greater.

To whom should support go, and what is the alternative that we should resort to in times of crisis like the one we are experiencing today?
Currently, half of the population is poor, and a quarter of the population is below the extreme poverty line. In priority, they should benefit from the support, and not others. But in my opinion the support should be a temporary measure. Targeting specific groups to reduce the burden of living on them is possible when the foci of these groups represent 10% or 15% of the population, but when they rise to 50% and 55% and may reach 70% with the effects of lifting subsidies, the comparison between targeting approaches for specific foci and the overall approaches, Logic and analysis favor the choice of macro approaches, that is, social policies, and this is conditional on an independent government from outside the system, with legislative powers, and a progressive tax system … that is, an alternative draft ruling. Absolutely, the support should not be a vehicle for recording illusory victories around social solidarity as an alternative to a social development strategy in which the issue of income sufficiency and complementary social guarantees is among the foundations of the system through a tax system, guarantee institutions, universal health coverage, and a quality of formal education that is “appropriate” … these are some The foundations. Talking too much about poverty and the poor becomes a lie when subsidies are used as a sustainable solution and as an alternative to revisiting the overall social strategy.

What will be the impact on society in light of the state’s withdrawal from subsidies, modification of its mechanisms, reducing its sums, or allocating it without a social policy?
History of support in Lebanon was on the blind. It was a sustainable subsidy when the taps of flows were open to Lebanon from investments and exports of goods and services, while today the money available for support is limited. Therefore, what is worrisome is that the greater cost of this coincidence between the collapse and the repercussions of the Corona pandemic and the Beirut port explosion, the final outcome of which will be the emigration of promising middle-class forces as middle-class professionals, businessmen, researchers, doctors and engineers … the tendency towards migration among these groups will be high, What makes the shifts of demographic factors worrying, as they will be comprehensive and deep and put us in front of a country we do not know in which the majority of people are poor or marginalized and without creative capabilities that allow them to move towards a productive economy, in a country where, at a minimum, a million resident Syrians are pressuring the international community to keep them in Lebanon as a political pressure card In negotiating solutions in Syria, and about 400,000 non-Syrians, including domestic workers.
There are countries that have succeeded to some extent in targeted support policies, but this matter requires the existence of a financial number for each person and the regularity of his financial accounts and tax declarations, and is subject to a progressive tax system. Support policy can be directed much better and smarter. But we live in a country where banking secrecy prevents us from knowing anything about anyone.

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