The banking sector has long been a key pillar of Lebanon's laissez-faire economy. Yet little is known about the making of that sector and its relationship to economic development, state formation, and foreign intervention. In Banking on the State, Hicham Safieddine offers an original, persuasive, and accessible analysis that historicizes Lebanon's banking sector and sheds new light on a host of familiar events.
The book opens with an exploration of monetary space formation in the territories that currently constitute Lebanon during the late Ottoman (1863–1918), French colonial (1918–43), and early independence (1943–50) periods. It then moves through the banking sector's shifting internal dynamics, its relationship to state institutions, and its place in the trajectory of economic development up to 1975. Safieddine traces new currencies, monetary institutions, and financial regulations, and how they both underpinned political regimes and shaped the local banking sector. His broad range of sources includes first-hand accounts of Lebanese politicians and bankers, published and unpublished treatises of local economists and bureaucrats, annual reports of the central bank and the banking sector, Lebanese and other periodicals, IMF documents, and US diplomatic cables. In a prescient conclusion, Safieddine outlines the legacies of the history he uncovers for the post-civil war (1975–90) period. He challenges us to think of the dynamics analyzed “not as a one-time event in the past, but as an ongoing process of constructed state-embedded regulatory regimes” (p. 180). Doing so is critical, both to understanding the nature of banker power in contemporary Lebanon and to thinking through alternative futures.
Banking on the State introduces a new group to Lebanese historiography: the “developmental institutionalists” based at the American University of Beirut (AUB). Spanning three generations from the 1930s to the 1970s, this group of men “altered the terms of political discourse and government action” in the fields of economic development and financial reform. (p. 52) By excavating the work of Said Himadeh, Yusif Sayigh, and Salim Hoss, among others, Safieddine expands the history of Lebanese economic thought well beyond the confines of scholarly overreliance on figures such as Michel Chiha and Gabriel Menassa. He grounds the AUB institutionalists’ activities in regional and global intellectual traditions and institutional networks that shaped the post-World War II international order.
The book also features several local bankers and the Association of Banks in Lebanon (ABL). Scholarship on development policy in Lebanon typically narrates the “triumph of traders over industrialists” (p. 73). Safieddine shifts our attention to the financial sector, demonstrating the central role it played in ensuring the Lebanese oligarchy's political and economic domination. Initial fault lines between French-allied banks and emerging rivals largely linked to US and Gulf capital shaped both competition in the money market and differential attitudes toward the idea of a central bank. This interbank rivalry eventually gave way to a unified and self-organized sector. For Safieddine, the 1956 Banking Secrecy Law was a driving force in the rise of “banking power” in the late 1950s and early 1960s (pp. 82–85). Banks in Lebanon—both local and foreign—established the ABL in the face of the post-1958 “specter of state-led regulation of the banking profession” (p. 87). The subsequent creation of the Law on Money and Credit (1963) was a major turning point in banking history. It was “the first time banks were treated as a distinct corporation subject to its own laws, as opposed to the Commercial Code” (p. 92). The ABL's success in hollowing out the law's regulatory provisions was a testament to the efficacy of banker power and collective action.
The book's overall narrative pivots around the establishment of the Central Bank (1964) and the banking crises that led to additional state institutional arrangements, namely the National Deposits Insurance Scheme, the Higher Banking Commission, and the Banking Control Commission. Safieddine elucidates the unequal role of the ABL, the AUB institutionalists, the President's office, and US-anchored supranational policy networks in designing these institutions and the regulatory regime that would come to govern the banking sector. These reforms had the paradoxical effect of simultaneously increasing state intervention and protecting, rather than regulating, banker power. This is primarily due to the success of the ABL in embedding itself into the regulatory framework. Through his analysis, Safieddine also sheds new light on the well-known 1966 Intra Bank affair: the collapse of Lebanon's largest bank, founded by Palestinian Yusuf Beidas in 1951, which threatened both the banking sector and the political establishment. He brings to life the global dynamics that initiated Intra's troubles, the profit-driven intrabank rivalries that exacerbated them, and the consequences of both for banking regulation. Equally important, he locates the Intra affair as the highpoint in a series of local banking crises (1964–67) and the turning point in a series of regulatory reforms (1966–73). Banking on the State demonstrates how by 1975, “central banking had been transformed from an object of domestic doubt . . . into an indispensable bureaucratic instrument of banker power” (155).
Safieddine theorizes state institutions as objects of mobilization and guarantors of the very economy that many have inaccurately described as driven by market forces. He challenges prevailing scholarly assumptions about the French colonial and post-independence periods. For example, the book's chapters repeatedly point to the rationalization of public administration as a central tenet for many historical actors yet distinct from both a critique of laissez-faire policies and advocacy for state-led development. Understanding this dynamic allows the author to take seriously the role of state institutions and debates around them—upending previous scholarship's emphasis on the alleged absence of the state.
Safieddine also sheds light on the structural influences of the international financial order and its institutions, norms, and dynamics. We learn how local mobilizations around development selectively drew on the “US-based institutionalist movement in economics” and how the transformation of dominant theories of financial management affected the normative assumptions that undergirded technical evaluations of Lebanon's economy (p. 58). Throughout several chapters, the author explores the role of the International Monetary Fund (IMF), US banks, and Saudi and Kuwaiti investment practices in shaping material realities such as capital flows and the range of strategies devised to respond to these fluctuating realities. In distinguishing and bringing together both internal and external debates and factors, Safieddine complicates the picture of local bankers and bureaucrats. At times, “they found themselves in an antagonistic position vis-à-vis foreign officials” whom they otherwise allied with or looked to for inspiration (p. 12).
By highlighting different junctures, Banking on the State challenges the conventional periodization of post-colonial Lebanon into presidential regimes: Bishara al-Khuri (1943–52), Camile Chamoun (1952–58), and Fuad Chehab (1958–1964). Safieddine identifies the 1948 Franco-Lebanese Monetary Accord as marking one juncture: inaugurating a Lebanon-specific lira delinked from the French franc. The second major juncture is in 1963, when politicians introduced the first banking-specific regulations. Other turning points include the 1956 Banking Secrecy Law that began the dramatic expansion of the banking sector, the 1966 diversion of Petrodollars from Beirut as US, European, and Arab banks eroded Lebanon's “quasi-monopolistic role as an entrepot” (p. 135), and the 1973 amendments to the Law of Money and Credit that transformed the Central Bank into a “lender of first rather than last resort” (p. 168).
There are some areas in which Safieddine could have further elaborated his arguments. For example, he astutely describes the justifications for and interests driving the banking secrecy legislation but gives no indication of what if any opposition and debate it encountered. Furthermore, Safieddine points to the ABL's early reports prioritizing “collective advocacy against perceived threats to the sector, both external (state regulation) and internal (union activism)” (p. 89). More could have been said here about the role of labor, and in particular the Syndicate of Bank Employees’ prominent role in the 1950s. Such omissions, however, do not detract from the overall argument nor the profound insights the book advances.
Banking on the State is an innovative and groundbreaking contribution to the historiography of Lebanon. It is a treasure for researchers and students interested in the political, social, or economic history of Lebanon as well as financial history and post-colonial state building more broadly. Safieddine puts Lebanon into conversation with regional and global debates on post-World War II history, political economy of development, and the history of economic thought. It will be required reading for historians and other scholars of Lebanon and the Middle East.
