Definition Of The Economic Crisis Economics Essay
A definition of the economic crisis provinces mentioned on the online dictionary www.business dictionary.com is the following A state of affairs in which the economic system of a state experiences a sudden downswing brought on by a fiscal crisis. An economic system confronting an economic crisis will most likely experience a falling GDP, a drying up of liquidness and rising/falling monetary values due to inflation/deflation. An economic crisis can take the signifier of a recession or a depression. This sudden alteration or instead recession hit the whole fiscal universe in the 2007 crisis.
The universe ‘s population ideas of the terminal of the universe and the movies that they pictured for 2012 finish, was truly a contemplation of the economic crisis. However, cipher thought that it will be fiscal with the universe economic system as a mark.
The economic crisis struck the universe in 2007 and is still redundancy for today on the economic system of the most controlling fundss of the universe ‘s biggest states. Lebanon, entirely, seems to be situated on Venus and non on Earth was affected distinctively of all other states. When all the other states were shaken by this crisis, Lebanese economic system was directed on the safe manner, neglecting the outlook of the universe organisation of study. As the Lebanese Governor Riad Salameh stated, “ Lebanon showed resiliency against the 2007 universe economic crisis. ”
What any authorities should indue to its people are simple insecurities that were greatly affected by the secular economic crisis, yet it was the instance in Lebanon before any crisis at all. The basic insecurities: the physical ( war, population, ethnicaˆ¦ ) , political ( offenses, rightsaˆ¦.. ) , economic ( poorness, unemploymentaˆ¦ ) , and societal ( nutrient, wellness, environmentaˆ¦. ) . ( Hourani, 2009 ) . All of the securities are missed in the Lebanese community, Lebanon base on balls in regional war, every now or so, political relations in Lebanon is like Mafia occupations ( life of a politician is worthless and blackwashs are ever on the tally ) , as for employment it is the unsolved struggle in Lebanon which consequences in 50 % of population in-migration.
“ Lebanon has had an of all time increasing spread between the current history and the capital history balances. “ ( Yacoubian, 2010 ) . Yacoubian references three of import influxs that made Lebanon stand on his pess during the crisis. First of wholly, he mentions remittals. As most of the Lebanese are immigrants due to the uninterrupted political instabilities and wars in Lebanon, when any crisis hit Lebanon immigrants direct money to their households which increase the influxs and therefore the rate in the Bankss. The 2nd of import thing that Lebanon count on is direct investing. Foreigners and particularly Gulf states invest straight in Lebanon and it increases the income from foreign states and lessens losingss.
Therefore the Lebanese immigrate direct his money to his fatherland to fulfill their demands. All the sum of money sent in is in favour to the Lebanese economic system every bit good. Furthermore, they invest, purchase and pass summer clip here. Therefore the Lebanese followed certain character scheme that helped in keeping the Lebanese economic system and furthermore endorsing it up.
Foreigners will besides follow to the rate addition. The 3rd most of import factor is the foreign assistance. Lebanon was in a crisis before 2007. Therefore, Lebanese uninterrupted crisis: war and political hits, created combatants, Lebanese employers who maneuvers fortunes and non the antonym.
“ You could hold thought they had a crystal ball ” this is what Edward Gardner from the International pecuniary fund thought about the Lebanese economic system and its reaction to the fiscal crisis ( Antelava, 2010 ) . Lebanon is a little state with an economic system largely based on touristry that is on the income of foreign European, American and Middle Eastern beginnings. I guess this is the crystal ball that everybody is losing. What were largely affected in the stock market because of the fiscal crisis were the oil grosss, and the oil exporting states. ( Sturm & A ; Sauter, 2010 ) . Lebanon is n’t one of these states it is an importing-oil state that benefits from the autumn in stock market and the new monetary values.
Furthermore, The Lebanese Bankss had to maintain 30 % hard currency buttockss and they were n’t allowed to put on the line in international debts ( Antelava, 2010 ) . This conserving attitude was the charming stick that pulled Lebanon like a hair from the bough. Lebanon was tested in private crisis before. Due to “ instability ” , as Mr. Salameh said, in the Lebanese economic and political province, this method was tested before and forced upon the Lebanese Bankss. All the old crisis that hit Lebanon was like the lab mouse that created the sole remedy for the secular economic and fiscal crisis.
Furthermore, this leads to foreign inter-investment as good. Tourism is one sector of many fiscal sectors, yet being individual focused ; the Lebanese economic system creates unemployment in many different sectors. As a consequence, the Lebanese tend to migrate to different continents to happen occupations. Largely immigrants arrive at America known as the dream land. Lebanese excel in abroad as a consequence of their assortment of experience in their ain state. Many Lebanese figures are bedrocks in the American and African economic system. Many physicians, attorneies, chiefs and gross revenues people are stand outing in other topographic points.
One more advantage of the Lebanese employers is instruction. Lebanon is worldly known for the assortment of the educational establishments that are French-based or American-based that graduate coevalss of experient and skilled people ready to set what they get in pattern and develop it. Their skylines got shot down by Lebanese struggles and acquire broadened by foreign capablenesss and assortment of Fieldss.
Lebanese economic system is chiefly based on services and touristry. Servicess are n’t straight attached to any of the autumn or recession in the stock market. As for touristry, this subdivision is backed up by the foreign investing in Lebanon, the authorities is taking the income increasing involvements from foreign beginnings without being straight affected. This is the system of “ antifragility ” that Talib talked about and Javier mentioned in The Black Swan. As an economic system that is based largely on touristry and services, Lebanese economic system is considered weak. Yet, this system of mistakes was good to Lebanon to force him up while the finance of other states was hitting down.
As a consequence certain tools will be used to demo the qualitative and the quantitative information of this research. A study will be distributed on Lebanese immigrants and Lebanese workers to analyze the impacts and their schemes that they followed during the economic crisis. One or two interviews will be made by immigrants and directors to demo us how their companies were affected.
Therefore, the paper will include the literature reappraisal ; a sum-up of the subject and the theories of economic system that will be related to the particular economical Lebanese reaction to the universe fiscal crisis. Then, the methodological analysis will explicate on the study and the questionnaire intent. The analysis will turn out the aim of the research. Finally, a little decision will follow to sum up the whole research and give an sentiment on the whole survey.
1.1The intent of the survey:
After the universe economic and fiscal crisis hit the universe, under no conditions it was expected that any state would excel it redundancies. Contrary to any outlooks the Lebanese economic system was saved from the crisis and crossed it safely and strongly. To be able to understand this strange phenomenon, the intent of this research is to analyze the impact of the economical and the fiscal crisis on Lebanon, every bit good as the impacts and the effects of the Lebanese immigrants on Lebanese economic system at that clip.
2.1 The impact of the universe economic and fiscal crisis on Lebanon: general thought.
The universe economic crisis has hit the universe economies harshly and is still doing a recession in the Europe and American economies up boulder clay that twelvemonth. Surprisingly Lebanon has managed to get away all these struggles as luck played a great function in its favour, we can non name it elsewhere. The remittals from immigrants was the save boat of the Lebanese economic system.
Furthermore, the Middle Eastern public and political revolutions that followed embossed the Lebanese economic system, nevertheless non intentionally. Syria is a touristic topographic point because of its geographic large countries, assortment in historical finishs and inexpensive merchandises. The same thought could be applied to Egypt the land of the Nile that is besides the finish for a great figure of tourers. Therefore the revolutions that struck touristry in both states were decidedly in the favour of the Lebanese touristry.
2.2The Lebanese economic system: agony and surviving.
Lebanon invariably experience political clangs and wars. Before that crisis, Lebanon faced the 2006 war, the increasing dollarization and in the stock market was unable to be controlled by the coordination of the cardinal bank and the Lebanese authorities. The capital influxs right after each daze Lebanon face truly stops the shaking of his economic system and fiscal sectors. The Lebanese immigrants influxs and the Arab loans and contributions and surely back-up the whole Lebanese system.
The economic crisis was “ due to the irresponsible policies and deficiency of ordinances in the fiscal market ” , ( Hourani, 2009 ) . This instability affected the full Earth. This crisis nevertheless went on to alter to a occupation crisis. Companies tended to cut costs and downsize, go forthing 1000s and 1000000s of people unemployed. This state of affairs led to further back-to-back jobs.
Table 1 Basic Economic indexs
Exposure to the chief transmittal channels of the planetary recession
Exports of goods and services/GPD ( 2009 )
oil exports/total exports ( 2009 )
Tourism sector/GPD ( 2009 )
Inflows of remittances/GNI ( 2008 )
Foreign direct investing inflows/GPD ( 2007-2009 )
United arab republic
West bank and Gaza
Beginnings: IMF and 1 ) World Travel and Tourism Council ( WTTC ) , 2 ) World Bank, Global Development Finance Indicators ( 2008 ) , 3 ) Economist Intelligence Unit ( 2009 ) , informations for 2008.
( Sturm & A ; Sauter 2010 )
This tabular array shows the Lebanese progress on other state and it excessively relates to its retrieving from the universe crisis. It shows the recent inflows that ‘s the innovator in the Middle East regardless of oil exports and grosss. Tourism in peculiar is ever on the addition in this tiny-Middle Eastern state and that is harmonizing to the World Travel and Tourism Council ( WTTC ) ( Nicholas & A ; Sturm, 2009 ) .
Growth in tourer reachings in 2009
United arab republic
West Bank and Gaza
Beginning: World Travel and Tourism Council ( WTTC )
Tourism is the other Lebanese life boat sing the economic crisis. As this tabular array shows Lebanese touristry is on the changeless addition non limited to a season or certain events. Lebanon ever attracts tourers from all around the universe. It added to it the Middle Eastern wars and revolutions that made Lebanon the Prime Minister pick for aliens to see, pass and put in.
2.3.1 Banking sector:
Harmonizing to its banking policy, Lebanon has a “ hazardous bounded economic system that ever follows a conservative attack ” ( Yacoubian, 2010 ) . Lebanon was retrieving from the 2006 war and with a rumour of a coming crisis Lebanon had to protect its economic system, or else it would falsify. But since the class of events were in Lebanon ‘s favour interiorly and exteriorly, the flow of money and sedimentations from investors and immigrants helped Lebanon to command liquidness by increasing the rate on the Lebanese lb and diminishing it for the US dollars. Furthermore, there was an addition in sedimentations from 92,077 billion LBP in 2007 to 101,435 billion LBP at the terminal of the same twelvemonth. ( Yacoubian, 2009 ) .
Politically Lebanon is supported by chiefly all the dependable states, because of the political division. Moslems are economically supported by Iran, Saudi Arabia and America ; Christians are greatly adopted by Rome. All this spiritual fluctuation adds on the economical strength of Lebanon. It seems that this creates an independent banking Lebanese system, as it is enforced by the banking ordinances in Lebanon. “ It was really wise of the Lebanese regulators non to acquire involved in all the hazardous international investings that turned out to be the day of reckoning of many banking systems, “ says Edward Gardener of the IMF.
Shiller in his book ( 2008 ) Subprime Solution introduces a solution to retrieve from the economic crisis in the US, that is similar to the conservative rate system that the Lebanese cardinal bank enforce on its Banks, particularly those related with promoting the exchange of its currency instead than any other.
Therefore, Lebanese economic system surpassed the theoretical spread that Crotty talked about in the structural cause of the economic crisis. Crotty said that the NFA is based on a false bank ordinances which helped in the formation of the crisis. As we mentioned before, it seems that the banking Torahs in Lebanon saved him from this trap. ( Crotty, 2009 )
2.3.2 Other sectors:
Harmonizing to BSE ( Beirut Stock Exchange ) , it showed to be stronger than more active stock markets in the Middle East. A table taken from Yacoubian ‘s survey shows the exchange in the Lebanese stock market during the crisis:
Lebanese Stock Market Basic Figures
Market capitalisation ( US $ million )
Traded volume ( US $ million )
Traded volume to market capitalisation
Number of listed portions ( thousand )
Audi Research Department
Harmonizing to this tabular array and contrary to other more active stock markets, Lebanon was able to list and retrieve rapidly during the crisis, that is between 2007 and 2008.
Another interesting sector that has developed during and after the crisis is the 845 rise in the Electricite Du Liban ( EDL ) in 2009 where electricity increase4d from 10,500 million KWh in 2007 to more than 11,000 KWH in 2009. ( Yacoubian, 2009 )
Here we should halt to associate the Lebanese economic system to one of the economic theories “ antifragility ” . The Lebanese-American Essayist proposes a method called “ ant breakability ” in systems, that is, an ability to profit and turn from random events, mistakes, and volatility every bit good as “ stochastic tinkering ” as a method of scientific find, by which he means experimentation and fact-collecting alternatively of top-down directed research. ( Estrada, 2008 ) . This method that Nasib Nicholas Talib Suggested why Lebanon with stood the universe crisis better than more hardy economical states.
The Central Bank Governor Riad Salameh spoke at the 67th plenary of boards of Governors of the International Monetary Fund and World Bank group in Tokyo. He clearly showed how Lebanese outgos and Aidss are monitored and directed. He assured that the Lebanese authorities is helping endeavors to get the better of the universe crisis, particularly those related to the Fieldss of instruction and touristry. He besides encouraged on assisting the Lebanese people find occupation chances. Furthermore, from the gesture of gender equality, he encouraged adult female ‘s employment as a smart push for the Lebanese income and fiscal assistance.
2.4.1 Global Market
Lebanon is affected by the foreign tensenesss since it depends on nonresidents ‘ investings in Lebanon. During the crisis, particularly the gulf market, had low liquidness, therefore their investing in Lebanon decreased. Yet, there ‘s no manner that the Lebanese economic system be straight affected, it may be hit by recession but non by aside. The profitable bank sectors and its incomes in the face of the crisis helped in the resiliency of Lebanon for FDI and local investings. Still Fouad Zmokhol comments that the Lebanese authorities should stay “ argus-eyed ” ( 2010 ) or cognizant of the future economic programs and be careful of the fiscal stairss and back-up programs.
Foreign states tend to put in Lebanon more than any other Middle Eastern state, since most of the foreign investings belong to the touristic sector. Even during the crisis aliens invested in Lebanon particularly gulf and European states. Bing unrelated to the autumn in the oil grosss, and since the exports of nutrient and services increased as it is shown in the tabular arraies above, Lebanon proved to be independent of the full crisis.
In fact the foreign investing influxs clearly shows that, to do that clear we ‘re traveling to look at the following tabular array:
Foreign direct investing influxs:
( USD one million millions )
Beginning: IMF. Note: No information available for West Bank and Gaza.1 ) projections.
This tabular array shows that the foreign investing in Lebanon increased during the universe economic crisis that is between 2007 and 2008. Furthermore, after the Arab revolutions created refugees in Lebanon that every bit good invested at that place.
2.4.2. Interior market
We ‘re non saying that Lebanon was safe from catastrophes, the high monetary values of oil grosss affected Lebanese economic system, yet it helped in making a new good jurisprudence for all of the Lebanese citizens. A new pension and salary jurisprudence was put on the tabular array. An addition in the wage of all workers was given to fulfill the workers ‘ demands and in conformity to the crisis they faced. ( Sayid & A ; Robalino, 2009 )
2.5. The impact of the Lebanese immigrants:
Like a batch of people all around the universe, Lebanese were one of the nationalities who immigrated to the new universe, America “ the already successful and affluent in hunt of new chances, underprivileged who hope to make better abroad than they did at place. ” ( Hourani, 2009 ) . The affluent Lebanese made it, and the hapless are seeking their best. In both instances, and in the clip of crisis all these accomplishments goes back to the Lebanese economic system, for the Lebanese immigrants ever tend to direct to their households and travel back to their hometown.
Lebanon has a particular instance in in-migration due to the insecurities that the Lebanese instable political and therefore economical province offers to its people. A Byblos Bank survey shows that 10.3 of the Lebanese resident population emigrated between 1992 and 2007 and most of them were between 18 and 35 old ages old, which is the most productive age. Furthermore, the same survey shows the different insecurities that drive Lebanese people out of their state with mention to the following tabular array:
Main grounds for in-migration from Lebanon ( 1992-2007 ) ( % of respondents )
The FDI ( foreign Direct Investment ) which motivate 50 % of the Lebanese economic system, immigrants in flowed their economy into Lebanon to salvage lifetime work. Thus the bank histories increased, rates increased and therefore Lebanon was protected from farther losingss.
It is mentioned in Hourani ‘s book that harmonizing to Lebanon this hebdomad, the United Arab Emirates ( UAE ) , was the beginning of electronic hard currency transportations in 2008, at $ 227.3 million equivalent to $ 23.7 % of the entire US $ 960.4 received in Lebanon. The UAE was followed by:
Saudi Arabia, at US $ 14.66 million ( 15.2 % )
Katar at US $ 89.4 million ( 9.3 % )
Australia at US $ 63.8 million ( 6.7 % )
Kuwait at US $ 63.5 million ( 6.6 % )
The united provinces at US $ 62.8 million ( 6.6 % )
Gabun at US $ 39.3 million ( 4.1 % )
Canada at US $ 28 million ( 2.9 % )
Jordan at US $ 22.5 million ( 2.3 % )
Zaire at US $ 21 million ( 2.2 % )
Largely immigrants in Australia Canada and US tried their best to direct their money into their hometown because of Lebanese character that forbid him from puting outside his state.
Yet, those statistics were short because of the clip it was carried out in summer, where people in gulf or different portion of the universe were in holiday.
In fact merely 9.3 % of gulf Lebanese immigrants lost their occupations ( Hourani, 2010 ) .During the crisis, the remainder did n’t acquire any addition in the salary or any new publicities ; in fact their occupation was stabilized. The same per centum noticed a little lessening in the wages.
It seems that every belongings trade, or even marriage ceremonials any preplanned program made by the Lebanese immigrants, was delayed after the economic and fiscal crisis hit the universe. Lebanese people tend to pass their economy on a fancy matrimony which they celebrate in their hometown: Lebanon. Furthermore, detaining investings, jubilation outgo and scarceness in tourers influxs meant that there will be a clip when this sudden recession will detonate and be carried out all together at one time. Therefore, the recession that hit Lebanon in 2007 will decidedly will be followed by an betterment in economical and fiscal Lebanese position.
This is the instance now after reformation and defence of the Lebanese people against the crisis. The study we ‘ll do will demo how and why the Lebanese fiscal and economic modus operandi is really adaptable shopping life, touristry, nightlifeaˆ¦etc is straight renewed in Lebanon. The OECD international migration Outlook 2008 explains that:
In doing their determination to return to their place state, migrators consider non merely their state of affairs in the host state labour market, but besides the chances to open them in their place state. That is why most of the immigrants decided to lodge in the foreign states to alter occupation, occupant or be patient until the crisis is over. This means that the influxs to Lebanon ne’er stopped thanks to the Lebanese outlook and ability to undergo force per unit area, manipulate fortunes and high degree of instruction and experience that maintain them standing on their pess.
Certain “ endurance ” schemes were followed, such as, altering occupation sector, altering state or abode or utilizing another citizenship. ( Hourani, 2010 ) The immigrants cut on their disbursement wonts. Yet this occurred in foreign states non around Lebanon. So this was progressively positive to Lebanon, yet might hold hit the residential state. They even delayed trips to Lebanon and reduced the usage of recognition cards. Yet, this inflows balanced this spread with an addition in the banking rates every bit good. When some immigrants asked their partners to work to guarantee another income, they ‘ve thought that the crisis will go through shortly and that they ‘ll hold a munificent life with the new economical alterations.
The AHD reported in 2009 as it is mentioned in Hourani ‘s paper that “ it is the sensed deficiency of human securities that push workers to go forth their state of beginning in hunt for better employment and incomes. The push factors at drama are basically, unemployment, under employment and poorness. ”
Table for remittal inflow page 4 ( Byblos bank ) .
Remittance influxs ( as % of GPD )
Percentage points change 2008-09
( 2.3 )
( 2.4 )
( 0.9 )
( 0.2 )
( 0.1 )
( 0.1 )
United arab republic
( 1.6 )
( 0.0 )
( 0.2 )
Beginnings: World Bank, IMF, Lebanon National Accounts, Byblos Bank Economic Research and Analysis Department. ( 2009 )
This table shown by a Byblos Bank study on May the first 2011, shows that Lebanon was n’t greatly affected by the universe economic crisis in conformity to foreign remittals. It was and still the highest state with foreign influxs, its aside was everyday by 0.8 per centum merely. Furthermore, as this study references, that “ Lebanon ‘s nominal GPD grew by 16.3 % in 2009 ” , therefore the crisis truly, and harmonizing to the quantitative information left a positive impact on the Lebanese economic system.
Let ‘s expression at the other table put in this same study that represents the impact of the crisis on remittals influxs ( as % of GPD ) :
Lebanon truly owns a recognition to the Lebanese immigrants all over the universe who showed religion and trueness to their state and households. The immigrant remittals saved Lebanon and will travel on salvaging its economic system and finance. Therefore, Lebanon should take certain processs to see the securities of these immigrants if non in their hometown, at least on a land different from theirs. The Lebanese embassies should collaborate with the Lebanese authorities to see nice occupations to the Lebanese that is parallel with their certifications and experience. The Lebanese authorities should besides offer price reductions on going tickets and different other installations.