On Aug 4th, this warehouse in Beirut, Lebanon, caught fire.
When the fire spread through the building, this happened.
The fire detonated about 2700 metric tons of ammonium nitrate; a highly explosive material
that was stored here in the Port of Beirut.
The explosion leveled the port and left a zone of destruction 6 miles wide, killing
nearly 200 people, and wounding thousands.
Long before the explosion, Lebanon's economy was in a deep crisis.
Unemployment and poverty were on the rise.
And people flooded the streets in outrage over and over again.
For many, the explosion was the last straw.
So, how did Lebanon fall so far… and what can be done to fix it?
The first thing to understand is the make up of Lebanon's population.
For centuries, it's been home to both Christians and Muslims.
Both communities are further divided into religious subgroups or sects; the largest
being Maronite Christians and Sunni and Shia Muslims.
In the mid-20th century, these three sects shared power, but there was tension between
them.
In 1975, Maronite and Muslim militias sparked a civil war.
In Lebanon, a country now torn in two by the vicious battle for supremacy
between Christians and Muslims.
Two dozen ceasefires have been agreed and broken.
Soon other sects formed militias and joined the conflict.
In 1976, Syria invaded and in 1982 Israel followed, fueling more violence.
Fighting was particularly brutal in Beirut, which was divided among
the militias.
The Muslims control West Beirut.
The Christians are entrenched in the east.
The toll of human life is horrifying.
Over the course of 15 years, more than 120,000 people died.
Finally, in 1989, representatives of Lebanon's sects came together with other international
leaders to end the war.
They signed the Taif Agreement which divided the government among the sects.
In parliament, each group received a set number of seats and specific positions.
The President would be a Maronite, the Prime Minister a Sunni, and the Speaker of the Parliament
a Shia.
Shortly after signing the agreement, most of the militias disbanded but many of their
leaders found a place in government.
In this system, political parties were formed along religious lines and each sect claimed
different government ministries.
But this system wasn’t designed to be permanent.
Instead, the politicians separated their portions of the government and turned them into fiefdoms.
Using them to enrich themselves and their sects.
While using public money for personal gain, the politicians neglected to spend money on
the services they were supposed to provide, like garbage collection.
A report found that Lebanon was paying about $420 million a year for waste management.
Despite that, in 2015, garbage piled up around the country while politicians argued over
a new contract.
It was the same story across the government.
It spent $1 billion a year on electricity, a sector controlled by the Maronites, but
there were blackouts multiple times a day.
Every household paid a fee for public water, but much of it was undrinkable.
By 2015, discontent against government corruption was on the rise.
But nothing changed.
And that meant the same people stayed in power.
So government corruption continued to go unchecked.
Over time, the government racked up dangerous amounts of debt.
By 2015, it owed nearly $70 billion.
More than the country’s entire GDP.
But instead of trying to fix the problem, the government turned its attention to Lebanon's
most important industry.
Lebanon’s businesses pay for imports with US dollars, which they get through the banks.
And Lebanon’s banks famously offer high interest rates, which attract deposits from
clients all over the world.
Making it the most important sector in Lebanon.
Most of the banks are owned by or have ties to the sectarian politicians. And together,
they created a scheme to bring more money into the government.
It started with the central bank, which funds the government, offering very high interest
rates as an incentive to commercial banks.
So the banks deposited money there and made a huge profit from this interest.
In turn, the banks hiked their own interest rates even higher to attract deposits from
around the world.
And then poured that money into the central bank.
But this was unsustainable, neither the banks nor the government could really cover all
this interest.
"It's quite accepted that it's a bit of a Ponzi scheme."
The only thing keeping this scheme together was the banks ability to attract more and
more money.
And that started to crack in 2011 when Lebanon’s neighbor, Syria, collapsed into civil war.
Worried about putting their money so close to the conflict, investors started pulling
out of Lebanon's banks.
But the scheme didn't fully unravel until 2017, when Lebanon’s Prime minister disappeared.
I hereby announce my resignation as Prime Minister from Lebanon’s government.
Knowing that the will of the Lebanese is stronger and their determination is steadfast..
The Sunni Prime Minister, Saad Harari, resigned via a televised statement
from Saudi Arabia.
Then reports claimed the Saudis forced him to resign and were keeping him there.
Nothing has justified the apparent detention of Hariri by Saudi Arabia.
Saad Hariri and his family are hostages in the Kingdom.
After ten days the Prime Minister returned to Lebanon and took back his office but the
damage was done.
This time international investors lost faith in Lebanon and deposits plummeted.
Even Lebanese residents rushed to pull their money out of the banks.
Without new deposits, government and bank debt skyrocketed.
In 2019, the banks ran out of money and froze accounts, limiting what people could withdraw.
Leaving Lebanon’s people with a catastrophic problem.
To cover its debt, the government announced a new tax, sparking a revolution.
Lebanon is in the grip of unprecedented protest.
The anger was sparked by a government's announcement of a daily tax of 20 cents a
day on messaging apps such as WhatsApp.
To many, it was evidence that the whole system was corrupt.
And people from all sects flooded the streets in some of the biggest protests Lebanon had
seen in decades.
It was enough to force Prime Minister Hariri to finally step down, but the political parties
stayed in power.
Meanwhile, other countries and international organizations offered economic aid to Lebanon
if the government could reform itself.
But the politicians couldn’t agree and the economy kept falling apart.
In one year, Lebanon’s currency lost more than 80% of its value.
And unemployment has reportedly surged.
This was the state of the country when an explosion rocked Beirut.
While at first the explosion appeared to be an accident, it turned out to be the result
of this dysfunctional system.
According to reports, the ammonium nitrate sat in the port for seven years while government
officials bickered over who was responsible for it.
It's criminal negligence at best.
Prime minister Hassan Diab and several ministry leaders resigned, but the power-sharing agreement
remains intact.
It’s why many in Lebanon feel the country can’t recover until this system is abolished.
To make matters worse, there’s been a spike in coronavirus cases since the blast.
And now with its only major port destroyed in the explosion, Lebanon is struggling to
import what its people need to survive.
It’s left the Lebanese people to simultaneously demand for change and pick up the pieces.