Lebanon’s Crisis, an ExplainerLebanon’s Crisis, an Explainer

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Weekly grocery bills can equal months of a typical family’s income. Banks are refusing to let people withdraw money. Basic medicines are often unavailable, and gas-station lines can last hours. Every day, many homes lack electricity.

Lebanon is enduring a humanitarian catastrophe created by a financial meltdown. The World Bank has called it one of the worst financial crises in centuries. “It really feels like the country is melting down,” Ben Hubbard, a Times reporter who has spent much of the past decade in Lebanon, told us. “People have watched an entire way of living disappear.”

It’s a shocking turnaround for a country that was one of the Middle East’s economic success stories in the 1990s. Given the scale of the suffering and the modest media attention it has received while the rest of the world remains focused on Covid-19, we are devoting today’s newsletter to explaining what has happened in Lebanon, with Ben’s help.

How did this happen?

As often happens with a financial crisis, the situation built slowly — and then collapsed quickly.

After Lebanon’s 15-year civil war ended in the 1990s, the country decided to tie its currency to the U.S. dollar, rather than allowing global financial markets to determine its value. Lebanon’s central bank promised that 1,507 Lebanese lira would be worth exactly $1 and that Lebanese banks would always exchange one for the other.

That policy brought stability, but it also required Lebanon’s banks to hold a large store of U.S. dollars, as Nazih Osseiran of The Wall Street Journal has explained — so the banks could make good on the promise to exchange 1,507 lira for $1 at any point. Lebanese firms also needed dollars to pay for imported goods, a large part of the economy in a country that produces little of what it consumes.

For years, Lebanon had no problem attracting dollars. But after 2011, that changed. A civil war in Syria and other political tensions in the Middle East hurt Lebanon’s economy. The growing power of the group Hezbollah, which the U.S. considers a terrorist organization, in Lebanon also deterred foreign investors.

To keep dollars flowing in, the head of Lebanon’s central bank developed a plan: Banks would offer very generous terms — including an annual interest of 15 percent or even 20 percent — to anybody who would deposit dollars. But the only way for banks to make good on these terms was by repaying the initial depositors with money from new depositors.

Of course, there is a name for this practice: a Ponzi scheme. “Once people realized that, everything fell apart,” Ben said. “2019 was when people stopped being able to get their money out of the banks.”

Officially, the exchange rate remains unchanged. But in everyday transactions, the value of the lira has plummeted by more than 90 percent since 2019. The annual rate of inflation has exceeded 100 percent this year. Economic output has plunged.

Even before the crisis, Lebanon was a highly unequal country, with a wealthy, political elite that has long enriched itself through corruption.

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Some people have resorted to sifting through trash.Credit…Bryan Denton for The New York Times

Three new problems

Three developments since 2019 have worsened the situation.

First, the government tried to raise money by imposing a tax on all WhatsApp calls, which many Lebanese families use because phone calls are so expensive. The tax infuriated people — many of whom saw it as another example of government-imposed inequality — and prompted large and sometimes violent protests. “People outside looked at the country and said, ‘Why would I involve my business in a place like that?,'” Ben said.

Second, the pandemic hurt Lebanon’s already vulnerable economy. Tourism, which made up 18 percent of Lebanon’s prepandemic economy, was hit especially hard.

Third, a huge explosion at the port in Beirut, Lebanon’s capital, in August 2020 killed more than 200 people and destroyed several thriving neighborhoods. “A lot of people couldn’t afford to fix their homes,” Ben said. (This Times project takes you inside the port and shows how corruption helped to make the explosion possible.)

What now?

Lebanon formed a new government last month, for the first time since the explosion. The prime minister is Najib Mikati, a billionaire who held the position two previous times since 2005.

The French government and other outsiders have pushed the Lebanese government to enact reforms, but there is little evidence it will. The Biden administration, focused on other parts of the world, has chosen not to become deeply involved.

Many Lebanese families are relying for their survival on money transferred from family members living in other countries. “The only thing keeping a lot of people afloat is that most Lebanese families have relatives somewhere abroad,” Ben said.

For more:

“I long for the simplest pleasures,” Lina Mounzer, a Lebanese journalist, recently wrote for Times Opinion. “Every few days there’s a new low to get used to.”

These photographs document the chaos, poverty and darkened streets.

Hezbollah recently took a step to ease the economic crisis, importing fuel from Iran in spite of U.S. sanctions.

THE LATEST NEWS

Economy

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Factory shutdowns, clogged shipping routes and labor shortages are causing higher prices.Credit…Allison Zaucha for The New York Times

The price of food, rent and furniture in the U.S. has continued rising, partly fueled by a shortage of goods.

Retailers, shipping companies and ports will expand their hours to ease growing backlogs.

Social Security benefits will soon rise by the largest amount in 40 years.

The private equity industry has invested billions into fossil fuels, keeping some of the dirtiest energy sources afloat.

The Virus

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A vaccine clinic in San Antonio.Credit…Matthew Busch for The New York Times

People who received the Johnson & Johnson vaccine may be better off getting a Moderna or Pfizer booster, a study found. (Here is The Morning’s guide to the issue.)

Many Black Americans have changed their minds and received a vaccine. They explain why.

Cases have surged in Minnesota, where intensive care units are nearly full.

Politics

The Biden administration plans to develop wind farms along much of the U.S. coastline.

The House committee investigating the Capitol riot issued a subpoena to Jeffrey Clark, a former Justice Department official.

Paid leave, subsidized child care, universal pre-K or direct payments to families: Which should Democrats prioritize? Experts give their own answers.

Other Big Stories

The F.D.A. pressed food manufacturers and restaurants to use less salt.

A building blaze in Taiwan killed at least 46 people, raising concerns about the island’s lax fire safety standards.

The Norwegian police charged a 37-year-old man in connection with a bow-and-arrow rampage that killed five people yesterday.

The W.H.O. honored Henrietta Lacks, a Black woman whose cells were taken in 1951 without her consent and used for scientific research.

Adele announced “30,” her first album in six years.

Opinions

These charts — by Jessica Nordell and Yaryna Serkez — show how everyday sexism hurts women’s careers.

The N.F.L. is full of Jon Grudens, The Atlantic’s Jemele Hill writes.

MORNING READS

Blockbuster: A film director has finally made a “Dune” that fans will love.

Profile: Selma Blair wants you to see her living with multiple sclerosis.

A Times classic: Which country’s health care system would you pick?

Lives Lived: Myriam Sarachik escaped the Nazis, fought sexism in the world of physics and conducted groundbreaking research on magnetism. She died at 88.

ARTS AND IDEAS

Broadway’s ‘worst idea in history’

Fifty years ago, the rock opera “Jesus Christ Superstar” — with music by Andrew Lloyd Webber and lyrics by Tim Rice — opened on Broadway. Outside the sold-out shows, protesters called the musical blasphemous.

The production was a risk. It tells the story of the last seven days of Jesus’ life through the eyes of one of his disciples, Judas Iscariot. As Lloyd Webber recently told the British newspaper The Telegraph, producers considered it “the worst idea in history” and didn’t want to put it onstage.

Some initial reactions echoed those fears. The Times critic Clive Barnes panned the production: “It all rather resembled one’s first sight of the Empire State Building. Not at all uninteresting, but somewhat unsurprising and of minimal artistic value.”

Ultimately, the show won over audiences. A spectacle that married rock and musical theater, the musical paved the way for shows like “Les Miserables” and “The Phantom of the Opera,” Sarah Bahr writes in The Times. — Claire Moses, a Morning writer

PLAY, WATCH, EAT

What to Cook

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Credit…Sarah Anne Ward for The New York Times

You either like Manhattan clam chowder or you don’t. (James Beard called it “horrendous.”)

What to Listen to

The 22-year-old musician Joy Crookes’s soulful, introspective debut album, “Skin.” Listen to a track.

What to Read

Jane Goodall shares the books on her night stand. “There was no TV when I was a child,” she said. “I learned from books — and nature. Doctor Dolittle and Tarzan led me to dream about living with animals in Africa.”

Late Night

The hosts commented on William Shatner’s trip to the edge of space.

Now Time to Play

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The pangram from yesterday’s Spelling Bee was promotion. Here is today’s puzzle — or you can play online.

Here’s today’s Mini Crossword, and a clue: Seriously impressed (five letters).

If you’re in the mood to play more, find all our games here.

Thanks for spending part of your morning with The Times. See you tomorrow. — David

P.S. “I am glad people of other nations are concerned with our problems here,” Martin Luther King Jr. said, after winning the Nobel Peace Prize 57 years ago today.

Here’s today’s print front page.

The Daily” is about Rikers Island. “Popcast” remembers musicians lost to Covid.

Claire Moses, Ian Prasad Philbrick and Ashley Wu contributed to The Morning. You can reach the team at themorning@nytimes.com.

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