Sectarianism and the Market for “Lemons”.

By the Grateful Arab.

We keep arguing on this blog that we Lebanese must change our sectarian culture. That rather than simply consisting of a “mosaic of different religions trying to co-exist”, our country should instead be the result of groups of individuals interested in cooperating to create a modern nation. Yet we are told again and again that one simply needs to spend a short time in Lebanon to realize that Lebanese are deeply sectarian and have a “need” to cling on to their religious identities, and that accepting this unavoidable reality and making the best out of it is the only
intelligent alternative. We are also told that the one solution to this deep-seated sectarianism is the search for an elusive equilibrium between our different sects, one that will turn Lebanon into a semi-stable country until our next crisis comes along.

Why are we so infatuated with a sectarian democracy that has never given us any balance? Ever since our National Pact in 1943, our country has gone from crisis to crisis, whether in 1952, 1958, 1973 or 1975 to 1990. And for the most part, the years in between were not particularly stable either. Given that our current “balanced” system is obviously flawed, there should be an explanation as to why we seem to go out of our way to preserve it. One of them is that we Lebanese could make our current sectarian system work if only foreign powers did not interfere in our affairs. By now, this bad habit of always blaming outsiders for our woes is wearing thin, and the time has come for a more serious introspection.

As it has often been pointed out, we do not live in a dictatorship and there is actually a fair amount of freedom of choice in our country. In Syria for example, the Baath party has a monopoly on political life, whereas Lebanon is blessed with the freedom of voting for a plethora of politicians come election time. Yet every time we go to the voting booth, the outcome is the same: most of the successful candidates are the sectarian ones. Isn’t that the proof that we truly are sectarian at heart? I will argue that a sizable part of the Lebanese population is not sectarian, and that the huge demonstration of March 14 demonstrated this beyond the shadow of a doubt. The problem lies in the impossibility for non-sectarian parties to succeed, given that the whole political process is skewed against them.

I will borrow from the field of economics, and more precisely from George Akerlof’s seminal paper on “The Market for Lemons” in order to illustrate my point. Let us start with Gresham’s Law, namely that “the bad money drives out the good one”. Concretely, it means that if you expect the Lebanese pound to devalue, you will start spending all your pounds to get rid of them, and you will keep your dollars in the bank. As everyone else around you will most likely do the same, only Lebanese pounds will be used in day-to-day activities, while the stronger dollar currency will be kept in reserve. Of course, this assumes perfect information, with everyone realizing that the pound is getting weaker. Akerlof’s insight was to look at markets where asymmetric information prevails, for example those where sellers know more than buyers. An individual looking to sell his used car has more information about it than the person willing to buy it. If the car happens to be a “lemon”, also known as an unsatisfactory or defective vehicle, the seller will know it beforehand but the buyer won’t. In fact in most cases, potential buyers would not be able to distinguish the good quality cars from their bad counterparts. By putting “lemons” out on the market, their owners are able to sell their defective goods. At the same time however, they are hurting both the buyers and the sellers of good cars. Buyers are more reluctant to buy; and “honest” sellers are more reluctant to sell as the prices are driven down by the fact that buyers no longer know whether they are purchasing a lemon or not. In Akerlof’s words, “there tends to be a reduction in the average quality of goods and also in the size of the market”.

The same reasoning can be applied to our sectarian democracy. In our national system, we are fragmented along religious lines, each community getting a pre-determined number of parliamentary seats and administrative positions. Our politicians have their narrow agendas, which usually consist of dominating their clan, region, and if wildly successful, their sect. They will rarely attempt to become national leaders for fear of losing their original sectarian support. The result is a heterogeneous system where our Zu’amas do not need to share information about their plans with anyone, since their electoral base supports them either for their survival skills or for the services they are providing them. The average citizen usually has no clue about what its leaders are up to. One day they are in Damascus singing the praise of their eternal leader, the next they are in Washington cursing him. And this is just one example among many. Just think of any political figure in Lebanon and ask yourself how predictable he or she is. The press as well as the blogosphere is filled with comments regarding the fickleness of so and so, and how some prominent leaders got together but were “tight-lipped” after their meeting. The means our politicians use to succeed are strictly private, they don’t go around advertising their next move or their program, and even in the rare instances that they do, we realize that they are not trustworthy. Lebanese politicians have the information, while average citizens have to resort to reading coffee grind to guess what is happening: a textbook case of asymmetric information.

To further illustrate the point, let us randomly pick a Lebanese political party, say Mr. Hariri’s Future Movement. What type of information do we have about it? Is it: a) a sectarian movement aiming to dominate the Sunni community?; or b) a national inter-sectarian movement? Is its long term plan: a) to establish Sunni domination in our area? or b) to build a strong and independent Lebanon? Undoubtedly some individuals at the apex of FM have a clear idea of the goals that need to be achieved, but they are obviously not sharing the information with the rest of us. It should be remembered that after his father’s murder, Mr. Saad Hariri visited president Chirac in Paris, President Bush in Texas and the Saudi authorities in Riyadh, yet not the slightest hint of what was said ever transpired. We were left to speculate and to look at shreds of evidence to try to understand what his plans are.

The same exercise can be repeated with all of our parties and political leaders, and the result will always be the same: we have asymmetric information and it is decreasing our trust in the system as well as the average quality of our politicians. We are unable to differentiate the good candidates from the bad ones, and what usually ends up happening is that we resort to useless speculations to try to understand what is going on.

Our situation is similar to that of the market for lemons, in that the bad politicians are driving out the good ones. Some intelligent and reliable candidates are not getting involved in our political system, for fear of having to interact/work with some of the shadier characters. Besides, we barely trust any of our leaders; when honest ones appear, they are immediately assimilated to the surrounding political lemons because of our lack of trust in what they really stand for. It is only a matter of time before they turn into lemons too, at least that’s what we assume. That we do not have many new quality leaders is the result of Gresham’s Law with asymmetric information. Capable politicians and political parties either do not get involved, or do not stay around for very long. We are left with our usual sectarian leaders, and of course it is then assumed that all of us are indeed sectarian.

It can be argued that all politicians are fickle. Obviously no one is ever totally predictable, but citizens in other countries obtain enough information to be able to roughly understand what a political party stands for. In the United States for example, a duopolistic political market, both Republicans and Democrats put together detailed national programs, and the public has enough information to make up its mind on which party (if any) to vote for. Debates surrounding important issues occur, and the media are always searching for and advertising every piece of information available. In our fragmented sectarian democracy however, politicians do not have to be specific or have national agendas. All they have to do is improvise as they go along, enough for them to survive as leaders.

One consequence of this situation is wide-spread patronage: just choose your leader, do not question what he does or really thinks, and hope for the best. Choose one that has been striving in the sectarian system long enough to be proficient at survival, and if he succeeds, you will feel the trickle-down effect: free medical care for yourself, a job for your daughter, a sinecure for your son etc. Thus, we have individuals in our country who are not very demanding, not particularly interested in having a respectable nation, and as a result accept the low average quality of our politicians. But we should not generalize this point of view and claim that our Lemons are the best we can get.

Another consequence is that given “the reduction in the average quality of politicians and the size of the market”, a sizable part of the Lebanese population is being marginalized and is voting with its feet by leaving the country. Our sectarian democracy will end up creating the Hollow Republic, with the productive and educated segment of the population migrating in droves. Not that it bothers our political lemons for they will still be able to play their sectarian games, while the country will be receiving funds from the expatriate population. A shrinking market suits our Zu’amas just fine.

The question at hand is how to break the vicious circle of sectarianism and political lemons. The obvious answer is to create a political marketplace that is not skewed toward both sectarianism and Lemons, one where we will not only increase the average quality of politicians, but also the size of the market. A few useful steps would include the following ones:

- Free Press: currently our media are controlled by the various political lemons ruling us. A truly free press is essential in helping Lebanese citizens get reliable information about our politicians’ real plans. It is essential to solve the problem of asymmetric information. We will never become a truly democratic country without political transparency and accountability.

- Independent Judiciary: bad politicians driving out the good ones (Gresham’s law) through illegal means, should be prosecuted to the full extent of the law. We should allow the judiciary power to be completely independent from the legislative one.

- Electoral Reforms: a large part of Lebanese voters are marginalized, either because they live abroad, or because they are expatriates in their own country, living away from the place where they are supposed to vote. The basic “one person, one vote” model should be applied to all Lebanese. The political marketplace needs to be expanded to include us all.

- Grassroots Movements: only by getting organized will the Lebanese be able to challenge the politicians that systematically provide them with incomplete or misleading information. The time has come for us to tell our political lemons that our basic rights are more important than their well-being.

Sectarianism is a reality in Lebanon, but it is not the only one. If the events of March 14 are any indication, a large part of the population rejects sectarianism as the only game in town, and aspires to build a nation that is both modern and free. Asymmetric information and a skewed political process are preserving the powers of our ineffective leaders and their organizations. Massive demonstrations to change regimes can only work if serious reforms are rapidly enacted, otherwise the “Revolution” will lead to “People Power Fatigue”. In the past year a majority of our compatriots have demonstrated that there is a will for real change in our country, they still have to figure out a way.

A Presidential Comedy

by Walid Moukarzel

Normally after a ‘revolution’ we get an influx of new thinking, new visions and new leaders.
Not in Lebanon. Here we do it differently.

In Lebanon we celebrate politicians who are experts in hindsight and cowards in foresight.
We call a politician courageous, if he collaborates with the enemy when the enemy is strong and derides the enemy when the enemy is weak.
We choose our national heroes by the number of crimes they have committed against us and we label fools the ones who wished to save us.
We measure the politician by the number of foreign countries he can bring to meddle in our affairs and call a traitor the one who seeks to shake his neighbour’s hand.

This is not a pretty picture to paint of the political landscape but neither is the canvas or the choice of colours.

The greatest risk in advancing any thoughts, ideas or potential solutions to solve any of Lebanon’s problems is the ridicule that awaits you. For, unlike any other country in the world, we in Lebanon, are experts on what does not work. Of course we are full of ideas when it comes to commercial ventures. But when it comes to political solutions even a child will tell you that your proposal will not work. Lebanon it seems is too chaotic and complex for any one to comprehend unless you are one of its politicians.

If the Iraqis are looking forward to a sectarian state disguised as a democracy then I can assure them a very successful future in the production of saints, martyrs, civil wars, occupation and invasions. If they thought the inclusion of God in their politics would deter politicians from corruption then they better hide their money fast. If they think their religious leaders would make up for the moral black hole that is a politician, then they best start their prayers. It is not so much that religion cannot govern; it is that politicians and God do not mix.

In Lebanon the cedar revolution was about freeing the people of Lebanon from its shackles and not chaining it to a constitution that has done all but guarantee its independence. Yet so far the evidence shows the revolution is being been hijacked by the politicians to protect themselves and not to improve the standing of the people.

Today they bicker about an illegitimate presidency and their solution is to find a compromise candidate who can please as many parties as possible with the exception of the party of Lebanese people.

Lebanon needs to start moving away from a sectarian state towards a more secular state. It must do so slowly but surely. And what better place to start than to have the President (even if he has to be a Maronite) elected by popular vote and not by criminals or foreign states.