Any lender asks a lot from and about their borrowers. The story is familiar to any Lebanese parent who ever needed to take out a loan of a few thousand dollars to pay their children’s school or university fees: the retail banker ought better to know your boss before they even sit you down with a customary cup of coffee in their office. But even then, receiving the loan could take about half an hour of signing contracts and initialing IOUs after weeks of waiting for the bank to consider your supplication, or what felt as such. This was the rule even in highly profitable years before 2010 when the Lebanese banking sector was amassing liabilities (your deposits) and bombarding consumers with supposedly low-interest education loan offers to quench their hunger for assets thus equally hungry for assets (the money lent to you).

Many Lebanese banks in those distant days proudly would pretend to distressed citizens that their arcane bureaucracy was a result of their conservatism and diligence. In this sense, the Lebanese state should not be all surprised to be asked many questions and have to commit to deep reforms when negotiating with the IMF. The current interactions with the fund, of which Lebanon has been a member since 1947, bears the marks of a distressed country seeking an agreement for the maximum amount that it is eligible to borrow in its time of need. But what may be even more sensible, and is not done as much as it should be done, is for the prospective borrower to diligently investigate and question their lender before entrusting them with their need and dependency.

Does the lender understand my needs and abilities to pay my obligations? Could I be lured into a perennial debt trap? What are the main objectives of the organization that I am interacting with and the possible hidden agendas? With regard to Lebanon’s future relationship with the IMF – peer country experiences show that a long-term exposure under recurrent agreements cannot be excluded – it is furthermore especially prudent to ask where the fund is heading politically, policy wise and in terms of geoeconomic direction. One simply must attempt to assess the gathering existential systemic quagmires that have to be faced by the global community, including the IMF and Lebanon, as the world as we have known it since the end of the Cold War, is shaking.

The globe that just doesn’t stop spinning 

Money, realists say, makes the world go round. The global propensity of burdening future generations with financial and ecological obligations has been trending up for at least two generations, or 40 to 60 years. This behavior of humanity, as translated into the long money and credit cycle, has meant increasing ratios of debt to GDP since the 1980s, with a particular spike during the Covid 19 recession. It also has transpired into financialization of the real economy. This hyper-charging has been both expanding and intensifying and can be tracked in the heightening of the financial meta-economy relative to the real economy. Notably, the two phenomena have reshaped the global operating environment of markets for all countries – developed, emerging, frontier, or failing.

For some market theorists, such phenomena, which have become explosive in the 21^st century to date, coincide or perhaps causally correlate with the downturn phases of a market empire’s long economic waves. This correlation would make the contraction phase of the “American century” super-cycle of economy and civilization that started in the middle of the 20^th century, a dire signal of warning of its last days as hegemonic civilization.

Humanity over the past 60 to 80 years has also been witnessing a long wave of relative peacefulness, a hunger for peace that has been informed by shocks of destruction and the insanity of war at the origins of this wave. Unfolding perhaps between a pole of want for security and search for power on one side and a pole of actively seeking for stable coexistence among all human nations, classes, and group identities on the other side, the classical inflection points of this long historical wave include relatively brief episodes of intense conflict but in their mass unfold externally (between nations or empires) as receding and strengthening assertions of power.

Lately, however, the super-cycle of capitalist civilization has seen aspirations to expand power by any means, including military means that reek of genocide and war crimes. In their economic impact, aspirations for safety come at the expense of alleged enemies or threatening opponents. Market actors will experience this propensity of sparking conflicts in a variety of forms, from cutthroat tech competition and trade wars to territorial conquests and ambient warfare driven by fear factors. If and when their accumulation comes to dominate risk perceptions of business deciders, as has been in the past two years, they contribute to uncertainty and hesitancy to invest. The correlated other long wave, the economic super-cycle of money and credit, currently seems to further destabilize the global status quo by entering the phase where the lifespans of global systemic institutions and the US dollar as the global reserve currency of the 20^th century both appear waning and are questioned.

Opinionated searches for super-cycle formulas and solutions

As the American century has been aging, the search for safe and sustainable economic and financial pathways has been in overdrive for nearly 20 years, driven by tech innovation and informed and alarmed by unjust widening of inequality, detrimental climate trends, and other widely perceived threats to popular economic safety such as migration, as well as wars in Europe, the Middle East, Central Asia, and Africa. Societies are further shaken by shocks such as the Great Recession and the Covid-19 pandemic and recession, but also by emerging technology challengers of digital transformation and acceleration of machine learning and AI agents that have been expressed as labor anxieties and livelihood upheavals. These societies strongly wish for new technique and tools of economic safety and invest great hopes and capitals in their development.

Framed by the cycle of technology fears and tech innovation, in addition to the cycle of money and credit, politicians, ideologues, economic theorists and practitioners have recently proposed new models and solutions for the global economic system that have been ranging from the most brainy and theoretical to the emotive and deeply impulsive. Specific ideas and intellectual attempts have been stretching from socialist debt cancellation, or alternatively the rebirth of a scriptural jubilee year to comparable effect of debt forgiveness, to applications of modern monetary theory whereby states spend first before taking in taxes and whereby spending on the aggregate level is alleged to produce societal income and create wealth.

Economic actors, opinion makers and various groups of stakeholders in the global system furthermore have placed their trust in social constructs such as distributed cryptocurrency creation, transformation of central banks from lenders of last resort to pawnbrokers of last resort, establishment of a Bretton Woods 3 system – including imposition of neo-Keynesian institutions that would seek to ascertain rebalancing of unhealthy trade surpluses and deficits by using top-down currency tools – or the partisan declaration of a national “record trade deficit emergency” by a simplistic decree. 

Universal but deeply uncertain impact

The world’s history books are full of holes and partisanship but there is overwhelming evidence that civilizations, cultures, and empires have limited lifespans. At the same time, predictions on the vitality and demise of large social bodies are nothing other than speculations born of either fear or wishful thinking, or a mixture of both. This explains why fin-de-siecle debates and theories, while wildly reverberating across global forums and sometimes gaining entry into papers by international financial and development institutions (IFIs), could at all times shake the minds of journalists, intellectual observers and historians far more than change the behaviors of imperial institutions and royal courts.

This observation applies to technocratic economic institutions of the present age, such as the World Bank and IMF. These entities of a bygone age have persisted in their entrenched patterns and duties, the latter conducting Article IV consultations and presenting projections on worldwide economic and financial developments, in manners that sometimes remind of ritualistic ceremonies of reasserting totemic certainties in front of captive audiences.

Yet beneath their seemingly calm authority, institutions can become fragile. Totems and rituals have historically been proven vulnerable and perishable as soon as they keep living solely in computer models but cease in being reinforced by the trust of real people. Even more notably, this conceptual fragility then spreads to the institutions that administer rituals and are beholden to tangible or invisible dynastic, political, or economic totems.

Since ritual-free human behavior seems to invariably drift toward adoption and practice of behavioral rituals, the damaging calcification of rituals affects not only social entities and institutions that are ideological or conviction driven but also impacts scientific and secular institutions. Ergo, by long trends of mindsets in waning empires and aging civilizations, those cultural environments provide natural markets to researchers of doom as well as evangelists of technological salvation and preachers of urgent repentance and behavior change.

Passing through complexification of global affairs over eight decades, the IMF has been resilient in face of recurrent and sometimes peaking criticism. In the mid 2020s, it remains standing strong as a global systemic institution and de-facto conditional lender of last resort to needy states. This notwithstanding, the fund’s role is tied to the increasingly unpredictable fate of the hegemonic system that it is a pillar of. Some of the IMF’s very founders and most influential powers speak of having lost their trust and reducing their own commitment to the fund. Uncertainty over the IMF’s future becomes therefore of necessary concern for the countries that are relying or seeking to engage with the fund.

The granular impact challenge

What rules the IMF is not a principle of equality. Voting power is concentrated and determined by member countries’ economic power and annual contributions, rules that remind of a plutocracy. This makes it all the more prudent for Lebanon, a minuscule, economically-challenged cell in the global community, whose sovereignty is severely under threat, to take a look at the state of the dominant hemispheric system before setting a strategy for economic recovery on basis of an agreement with the finance and policy behemoth IMF.

The starting environment of discussions was the opposite of benign. For years, the strategy of getting inflows of funds into the country’s financial system was both market based and relationship based. Despite consistent trade deficits, the balance of payments was propped up. Financing that was needed and could not be drawn in as foreign deposits became a fundraising goal, presented in conferences to diaspora, friends of Lebanon, and the international private sector and donor community in conferences from Washington DC to Paris.

This system looked sustainable to its beneficiaries until it was unmasked for its perilous flaws at the end of the 2010s. A systemic liquidity shock then triggered ineffectual or counterproductive, frantic and desperate measures, including the search for an IMF agreement, as international financial institutions with offices in Beirut declared with vehemence that they would not provide a penny to a Lebanese public entity without the conclusion of this agreement.