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The Economics of Human Security - Why Lebanon's Recovery Must Begin with Its People — ALEF
The Economics of Human Security - Why Lebanon's Recovery Must Begin with Its People
Mohammad Ibrahim Fheili
Executive in Residence with Suliman S. Olayan School of Business (OSB) at the American University of Beirut (AUB) and Capacity Building Expert
Published
July 25, 2026
Paris I convened in February 2001 to modernize Lebanon's tax code and jump-start a stalled economy. Paris II followed in November 2002: international donors pledged roughly $4.4 billion against commitments to privatize state industries, pay down debt, and cut recurrent spending. Lebanon collected barely half of what was promised and delivered on almost none of what it had promised in return. Paris III, convened in January 2007 in the aftermath of that summer's war, added billions more to the pile, wrapped in the same language of reform that had failed to materialize the first time. By April 2018, when CEDRE gathered fifty countries and $11 billion in pledges, the international community thought it had finally learned the lesson: condition the money on reforms delivered in advance rather than promised after the fact. Lebanon still did not clear the bar it had set for itself. The funding never fully flowed. Neither, predictably, did the reform.
Four donor conferences. The better part of two decades. Tens of billions of dollars pledged, argued over, and in several rounds disbursed, all in the name of stabilizing a country everyone agreed was in trouble.
The harder question is what happened to the portion that did arrive, and Lebanon's political establishment has spent twenty years making sure that question stays unanswered. The honest accounting is not a story of a country that tried in good faith and came up short on execution. It is a story of funds directed away from the households they were meant to protect and toward the networks positioned to intercept them along the way. This was not an isolated leak inside an otherwise sound system. It has been closer to a structural feature.
Call it the deep state, though the singular flatters the problem. What has governed Lebanon through this period is not one entrenched apparatus but several, overlapping and often competing with each other for the same shrinking pie: sectarian party machines running patronage networks in place of public services, security and intelligence structures with budgets and immunities of their own, a financial oligarchy embedded in the banking sector that profited for years from the very imbalances donor money was supposed to correct, and customs, ports, and procurement networks that have long functioned as private toll booths on public commerce. Each has its own claim on whatever revenue passes through the Lebanese state, whether that revenue arrives as tax collection, sovereign borrowing, or reconstruction aid pledged in Paris. None of them profits from a reform that closes off its particular channel, which is exactly why the same benchmarks kept reappearing, unmet, from Paris I through CEDRE. The conferences changed venues, sponsors, and acronyms. The interests blocking delivery did not.
End of Dispatch
What should have been built with that money is the counterfactual worth sitting with: a functioning deposit-insurance regime, a national health and education safety net, a housing-finance system, a social protection framework capable of absorbing shocks instead of merely reacting to them once they hit. Instead, the money that should have insulated Lebanese households from the kind of collapse the country is now living through was, in significant part, wasted, diverted, or captured before it ever reached them. The bill for that failure did not land on the deep states that produced it. It landed, and continues to land, on Lebanese families, which is what turns a fiscal and governance failure into something else entirely: a crisis of human security.
Lebanon has spent nearly a decade arguing about how to save its institutions. Banking reform, sovereign debt restructuring, fiscal adjustment, exchange-rate policy, and an elusive IMF program; these have dominated the conversation among governments, international partners, and economists alike. Somewhere in all of it, the security of the Lebanese household got lost.
That omission has been expensive. Financial systems are supposed to serve people, not the reverse. Governments borrow so citizens can live better; banks turn savings into productive investment; public institutions exist, at least in theory, to soften life's blows. Once those institutions stop protecting people, no amount of technical repair to the financial system brings recovery within reach.
Lebanon's crisis gets labeled a banking crisis, or a sovereign debt crisis, or a governance crisis. None of those labels captures what it has become: a crisis of human security.
The phrase usually conjures war zones or humanitarian disasters. But it applies just as directly here. Human security, in economic terms, is the ability to absorb one bad event such as a layoff, a diagnosis, or a currency shock without falling into a poverty you can't climb back out of. A society where households have that cushion isn't just kinder; it's more productive and considerably harder to destabilize.
Lebanon is the inverse case. Savings that took a lifetime to build sit frozen or gutted by inflation. Real wages have collapsed. Getting decent healthcare now depends on how much cash you have on hand. Housing is out of reach for young families. Parents are pulling their kids from schools they can no longer afford, and an entire generation increasingly treats leaving the country less as an aspiration than as the only option left. Policymakers tend to treat each of these as its own problem. They aren't. They're symptoms of one collapse: the slow disappearance of economic security.
Get this distinction wrong and the policy response goes wrong too. Lebanon's approach to social protection has been a patchwork - poverty programs, humanitarian aid, cash transfers, food assistance, and/or school subsidies. Let’s admit that all of his is useful; all of it is useful, in holding off deeper collapse, but it remains reactive. It is built to respond to a crisis, not to prevent one.
A real social safety net isn't a stack of welfare programs, nor a permanent enlargement of the state. Done properly, it's an investment in national resilience; however, it is not a substitute for markets, but the precondition for markets to work: the confidence a society needs to consume, invest, save, and take the entrepreneurial risks growth requires. Start with financial security. The banking-reform conversation in Lebanon has centered, understandably, on repairing balance sheets and deciding who absorbs the losses; it is necessary, but not the point. The point is restoring confidence that deposits are protected by rules people can enforce. A deposit isn't just a line on a bank's balance sheet; it's someone's retirement, a child's tuition, the difference between security and precarity for a family. Lose that confidence and people take their money elsewhere: cash, informal finance, capital flight. Every one of those exits weakens the financial system further. Get the framework right and it serves the whole society, not just the banks holding the deposits. The back-and-forth this year over the draft Financial Stabilization and Depositor Recovery law (i.e., the Gap Law), and the IMF's insistence that shareholders and junior creditors absorb losses before depositors do, is exactly this argument playing out in real time.
Housing is the second pillar. In economies that function, homeownership is how families build wealth across generations. Lebanon's collapse cut that path off for most of the middle class. Thousands of households still pay rent every month in fresh dollars; that is a real discipline, given how little else is stable, but none of that money buys them anything lasting (no equity, no asset, no security). Just another month covered. It doesn't have to work this way. Rent-to-own arrangements, shared-equity structures, public-private housing partnerships: each can turn a recurring rent payment into ownership over time. Housing policy isn't urban planning on the side; it's economic development, full stop.
Health and education round out the foundation. Countries coming out of severe crises tend to learn the same lesson: protecting human capital is one of the highest-return investments a government can make. A child who stays in school, a patient who gets preventive care, a household that keeps the lights on; all of it feeds directly into future productivity. Lebanon's debt restructuring shouldn't be judged purely by debt ratios or maturity extensions. Part of any debt relief needs to be earmarked for healthcare, education, targeted income support, and basic energy access. Call it humanitarian if that's easier, but it's really an investment in the country's future capacity to produce.
Put these pieces together and a bigger principle emerges. A modern safety net is less about redistribution than about risk management. Illness, job loss, disability, inflation, recession - none of that is a personal failure; It's the kind of systemic risk that hits entire societies at once. Public policy can't eliminate that risk. What it can do is make sure ordinary families have enough resilience to absorb it without being permanently pushed out of economic life.
That reframes how social policy relates to growth, too. The conventional view treats social spending as a drag on the economy. The evidence increasingly says the opposite: countries with stronger social protection tend to have higher labor-force participation, more entrepreneurship, better educational outcomes, healthier populations, and steadier financial systems. Security breeds initiative, but insecurity breeds caution, informality, and capital flight.
Lebanon doesn't need to import Scandinavia's welfare state, and it can't afford to try. What it needs is its own model that is built on partnerships between government, municipalities, banks, international organizations, civil society, private investors, and the diaspora. Less reliance on permanent subsidies, more on smart financial engineering: targeted guarantees, blended finance, real institutional transparency. Every public dollar spent should work as catalytic capital, pulling in private investment several times its size, rather than functioning as plain consumption.
Above all, this model has to recognize that economic security is bigger than income. It's the confidence that savings are safe, that a home is within reach, that healthcare doesn't disappear when you need it most, that a child's education won't be interrupted, that a bad month doesn't turn into permanent poverty, and that institutions run on transparent rules rather than whoever holds power that week. None of this is a luxury reserved for rich countries. It's the foundation every prosperous society is actually built on.
For years, Lebanon has tried to rescue its economy from the top-down starting with banks, then public finances, then macroeconomic stabilization. Those reforms still matter; however, they won't hold on their own, not without an equally serious effort to rebuild resilience from the bottom up. A banking system stabilized on top of an insecure population isn't stable. And growth doesn't emerge from a country living in permanent uncertainty.
None of this diminishes the importance of the technical fixes. Lebanon still needs a credible resolution law, a central bank balance sheet that reflects reality, an exchange rate that answers to one name instead of three, and an IMF program that gets implemented rather than merely negotiated. But those fixes are instruments, not outcomes. A country can hit every macro benchmark on paper and still fail its people if none of it reaches the household level — which is precisely what four donor conferences and two decades of “reform” already proved.
The real test of Lebanon’s recovery, then, won’t be the size of the fiscal deficit, the level of reserves, the exchange rate, or the signing of another agreement. Those numbers matter, but they are means, not ends. The real test is simpler, and harder to fake whether ordinary Lebanese families feel secure enough again to save without bracing for another haircut, buy a home without treating it as a fantasy, start a business without hedging against their own state, and plan for a future they can actually believe in rather than one they are merely enduring.
That is the economics of human security. It is not a slogan appended to the technical agenda; it is the organizing principle that agenda has been missing. Deposit protection, housing finance, healthcare, education, and social insurance are not separate policy lanes running alongside banking reform and fiscal adjustment. They are what banking reform and fiscal adjustment are supposed to be for. Treat human security as an afterthought, and the recovery, however well engineered on paper, will keep failing the people it was meant to serve, the same way Paris I through CEDRE failed them. Treat it as the foundation, and the technical fixes finally have something solid to stand on.
It might also be the piece of Lebanon’s recovery no one has been building. Twenty years and four donor conferences were spent trying to rescue institutions. What remains untried is rescuing the households those institutions exist to serve, and until that changes, Lebanon will keep signing agreements and keep missing the point of what recovery is actually for.
