Economic Sovereignty and the Fetters of Finance: the Making of Lebanon’S Central Bank
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Economic Sovereignty and the Fetters of Finance: The Making of Lebanon’s Central Bank By Hicham Safieddine A thesis submitted in conformity with the requirements for the degree of Doctor of Philosophy Near and Middle Eastern Civilizations University of Toronto © Copyright Hicham Safieddine 2015 Economic Sovereignty and the Fetters of Finance: The Making of Lebanon’s Central Bank Hicham Safieddine Doctor of Philosophy Near and Middle Eastern Civilization University of Toronto 2015 Abstract Lebanon gained formal political independence from France in 1943. Yet, its Central Bank, Banque du Liban, was not founded until 1964. This study is a critical history of the making of Banque du Liban. I trace the Central Bank’s formation from its Ottoman origins in the mid-19th century up to its inauguration in 1964 and restructuring a few years later following a major banking crisis. I analyze this history in the context of theoretical questions of state formation and institution-building in a Middle Eastern context. Employing a structural empiricist approach, I argue that Banque du Liban, as an instrument of monetary policy and a set of rules and regulations governing banking operations, was constituted by a complex interaction of war economies, international financial regimes, post-colonial state- building, global currents of technocratic knowledge, and private business interests. I show that despite its representation by Lebanese authorities as a symbol of economic sovereignty and growth, the resultant institution seldom acted as a lever for asserting monetary autonomy or pursuing economic development. It was, to a large extent, an apparatus that reproduced colonial monetary policies and, more significantly, served rather than challenged the interests of the indigenous banking class. ii My study questions dominant accounts of Lebanon’s post-WWII political economy. It eschews a sectarian framework of analysis, challenges the division of Lebanon’s post-WWII economic history into a laissez-faire period and a later planned phase, and emphasizes the institutional dimension of how political and economic forces shape the state. The study also aims to illustrate the historical specificity of the process of state building and the limits of economic sovereignty in a neo-colonial setting while simultaneously probing the degree of rupture and continuity in the evolution of financial institutions over time. iii To Moushka, of seas and sunsets To Bundu’, biking on a breeze To Jasmin, who would smile till the end of love And to newborn Layal, a labour of love worthier than this iv “Cide Hamete Benengeli was a very exact historian and very precise in all his details, as can be seen by his not passing over these various points, trivial and petty though they may be. He should be an example to those grave historians who give us so short and skimped an account of events that we scarcely taste them, and so the most substantial part of their work, out of carelessness, malice, or ignorance, remains in their ink-horns.” Miguel de Cervantes Saavedra The Adventures of Don Quixote v Acknowledgments Writing is often a solitary act but knowledge production is always a collective effort. In the course of completing this work, I benefited from the support and contributions of several scholars, librarians, friends and family members. My foremost gratitude goes to my advisor Professor Jens Hanssen whose intellectual insights, academic guidance, constructive criticism, prompt feedback, colleagial approach to supervision, and unremitting confidence in the worthiness of this study saw it through in a productive, creative, and timely manner. I also wish to thank Professors James Reilly and Paul Kingston who, as supervisory committee members, provided very valuable commentary throughout the period of writing. Their critique pushed me to better articulate my arguments and conclusions. I am grateful for the authoritative appraisal and helpful advice that my external examiner, Professor Roger Owen, offered as a roadmap to future research on the subject. I appreciated the fact that he flew to Toronto to attend my defense in person. Professor Mohamad Tavakoli-Targhi kindly agreed to act as an internal examiner on short notice. He raised important questions that will prove useful should I decide to expand my dissertation into a book. I also wish to salute the ongoing efforts of fellow Lebanese historian and friend Dr. Ziad Abu Rish to facilitate a promising intellectual exchange among emerging critical scholars of Lebanese political economy and state formation in the post-WWII period. Prior to settling on my topic and while in Beirut, I benefited from converstaions with Mr. Saqr Abu Fakhr and Professor Massoud Daher about Palestinian entreprenuers and US policy in the Middle East. During my fieldwork, dedicated librarians at the American University of Beirut’s Jafet library facilitated my research and provided unconditional support on a daily basis. My special thanks in this regard go to Ms. Fatmeh Charafeddine, Dr. Kaoukab Chebaro, Mr. Albert Haddad, Mr. Claude Matar, and Mr. Hussein Mokdad. Mr. Hasan Chamseddine at the IT department was always available to help me resolve never-ending computer glitches. I secured access to resouces at the Jafet Library as an affiliate at AUB’s Center for Arab and Middle Eastern Studies. At Banque du Liban, Ms. Rita Chakour spared no effort to assist me in locating bank documents and studies that were crucial to my investigation. Ms. Chakour has palyed a pivotal role in the expansion of the library collection at the bank. From start to finish, Ms. Anna Sousa at the Department of Near and Middle Eastern Civilizations provided unwavering administrative support. Her tireless devotion to generations of graduates is worthy of the highest vi accolades. It was a privilege to be able to draw on her experience in maneuvering the maze of university bureaucracy for all these years. Ms. Sousa’s dedication, as well as the commendable service of other staff at the University of Toronto, stood in sharp contrast to the role played by the university’s top administatin in the fostering of an ideal learning environment. I was able to fulfill the requirments of this degree inspite of, not thanks to, the increasingly corporatized and financially-precarious system of public education in Canada. Independent scholarship, the social sciences, and campus activism are at risk as a result of neo-liberal policies of successive governments. Unfortunately, the Univesrity of Toronto has taken the lead in implementing such policies and thereby in undermining the public education system and depriving its brightest and best graduate students from their basic rights. I hope that future generations of graduate students succeed, where my cohort failed, in securing a better future for higher education and in resuscitating its critical role of serving the interests of the public at large rather than the corporate world and its representatives in government. The friends and colleagues who kept me company during the years of my graduate studies are too numerous to list lest I forget any. The music of Fayruz, Um Kulthoum, Dirk Maassen, and Hans Zimmer were a different kind of company during long periods of reclusive writing. Finally but most importantly, I owe much of my determination and sense of purpose to the love and support of my family members: My father Nazem, my mother Fatina, and my brothers Najib and Ali. The birth of my niece Layal coincided with the completion of this dissertation, serving as a reminder of what matters most in one’s life, and what eventually fades into a footnote. vii Table of Contents Acknowledgments .......................................................................................................................... iv Table of Contents ......................................................................................................................... viii Note on Transliteration .................................................................................................................. xi List of Abbreviations .................................................................................................................... xii 1 Introduction ................................................................................................................................ 1 1.1 State Formation and Institution Building in the Middle East: Structural Empiricism as a Building Block ................................................................................................................. 8 1.2 The Dialectic of Sectarianism and the State ..................................................................... 11 1.3 Plan of Study: Historical Sources, Methodological Questions, and Narrative Approaches ....................................................................................................................... 16 2 Theoretical Considerations: Central Banking and the Lebanese Banker as Agents of State- building .................................................................................................................................... 26 2.1 Central Banking and Central Authority: The Theory and Politics of Monetary Space Formation .......................................................................................................................... 31 2.2 Post-WWII State Formation: Central Banking and the Wired World of Bretton Woods 34 2.3 Lebanon’s Banker: Elusive Entrepreneur or Parochial State-Builder? ............................