Today, many European countries are trying to reduce the size of their governments and give more space to the private sector. They have learned that large governments, heavy regulations, and expansive welfare systems are unsustainable. For Lebanon, this lesson is even more important.
Lebanon should not attempt to replicate the European welfare-state model. Instead, it should preserve its real advantage: a strong, dynamic private sector supported by a small, efficient government.
1. Why the big-government model does not fit Lebanon
The modern welfare state follows the model of social insurance created by Bismarck in the late 19th century, who scaled up community solidarity and Lutheran parish model to the level of the state. In a Lutheran parish, people pay contributions, elect their elders, and participate directly in creating the rules they would follow. This culture is built on trust, discipline and community responsibility. It works best in countries of northern Europe like Germany, Switzerland and Scandinavia can operate such a system because it matches their culture. It works less well in southern Europe, where rules traditionally were imposed from above. Instead of creativity being channelled to improve rules, it is directed towards breaking them. The system then fails as is obvious from the debt burden.
Lebanon is different. Here, the state is often seen as a source of benefits for communities, not as a system where everyone pays in and follows rules equally. Expanding the government usually leads to more waste, more patronage and more political interference. Instead of helping people, a big government becomes slow, expensive and inefficient.
Lebanon should not try to rebuild a state-service system that even advanced countries are struggling to reduce. This question lies at the heart of the debate over restructuring the banking sector and rebuilding the state.
2. A strong private sector is Lebanon’s real engine of growth
Lebanon’s private sector has always been its strength. It is flexible, creative, entrepreneurial and able to survive even during crises. It, de facto developed strong society institutions, because it had to, as the state gradually failed. We saw that after the Beirut Port explosion where people went to the streets and helped each other rebuild, mobilising diaspora assistance while politicians kept away and government did little.
A strong private sector means more jobs, more investment, more innovation, more stability and more opportunities for young people.
Meanwhile, a large public sector drains money without producing economic growth. Lebanon cannot afford a big, expensive state—especially after the financial collapse. There is little trust in public institutions controlled by politicians who have to work hard to regain credibility.
If Lebanon wants recovery, it must protect the private sector,not suffocate it with taxes, regulations or unrealistic demands.
3. Europe is shrinking government—Lebanon should not do the opposite
Europe’s experience is clear, big governments slow economies down. High public spending, heavy bureaucracy and large welfare systems have weakened competitiveness and reduced growth. The system worked for a while after World War II, but then started accumulating deficits and public debt. The new generations are faced with paying higher taxes for far less services.
That is why many European countries are now cutting public spending, reducing bureaucracy, encouraging entrepreneurship and shifting services from government to private providers.
When even Europe is failing to shrink its state, it makes no sense for Lebanon to head in the opposite direction and expand it —especially when our state institutions are weaker, poorer and less efficient. We must turn the challenge of a collapsed state into an opportunity to encourage private sector and civil society institutions.
4. The IMF plan risks hurting the private sector
Lebanon’s negotiations with the IMF are supposed to help rebuild the economy. But the current IMF proposal risks doing the opposite. The plan proposed, may put too much pressure on private companies, raise taxes at the worst possible time, strengthen state control instead of reducing it and use the private sector to rescue an inefficient public sector.
Lebanon must negotiate carefully. Reforms should fix the government, not punish the private sector. If the private sector collapses, there will be no economy left to save or to tax.
5. What Lebanon needs: less government, more freedom for business
A successful model for Lebanon should focus on:
A smaller, cleaner government, fewer employees, fewer subsidies fewer state owned companies, less political interference and better transparency.
A stronger private sector, simpler rules for starting and running a business, less redtape. Protection for investors and property rights, modern infrastructure, support for SMEs and entrepreneurs, partnerships with the diaspora.
Lebanon’s people are talented, entrepreneurial and ambitious. What holds them back is not a lack of creativity—it is a state that gets in the way. Lebanon has always thrived by attracting capital, talent and intellect from the region not by driving its own away.
Lebanon’s future depends on empowering its private sector
Lebanon should not try to copy welfare states that were designed for different cultures and that even Europe is now trying to reduce. Our strength has always been our businesses, our innovation, our openness to the world and our private-sector energy and the ability to absorb the best from the region.
A small, efficient government should support—not control—this engine of growth.
If Lebanon wants real recovery, it must keep government small, keep the private sector strong, and give Lebanese and regional talent the freedom to build the future.