# **Introduction**

From the end of the 19th century to the beginning of the 21st century, Lebanon has managed to attract large amounts of resources that are disconnected from the country’s productive system and its internal accumulation of capital. This was possible thanks to three major characteristics: a large Lebanese diaspora, a comparative educational advantage of human resources, and an efficient banking sector. Transfers of wealth from the diaspora were constantly high, but what changed is their nature. These transfers in the early years were mainly remittances sent to relatives or invested in housing or in different sectors of the economy. They were first amplified by capital inflows from the region and gradually took the form of deposits in the banking sector.

Seeking to attract capital that fled Palestine in 1948 and other Arab countries that experienced waves of nationalization, Lebanon implemented a law on bank secrecy in the 1950s and established the legal foundations for a modern banking system. These inflows helped to create the basic infrastructure on which Lebanon built its productive capacities in agriculture, industry, tourism, and services in the 1950s and 1960s. At the end of that period, the oil boom reached its height with multiple increases in oil prices starting 1973. In parallel, and thanks to skills acquired through an efficient education system set by missionaries in the 19th century, Lebanese labor massively moved to the Gulf countries where they were employed as engineers, specialists, and skilled workers. These emigrants have naturally transferred an important share of their wealth accumulated in the Gulf into Lebanon and its banking sector.

# **A. Lebanon: A History of Foreign Inflows**

“The wealth and luxury you see in this Mountain do not come from its land, but from the money saved by the sons of Lebanon in the emigration.” This sentence from the study ordered by the Turkish governor of Mount Lebanon in 1918, ( _Lubnan, mabaheth ilmiah wa ijtimaya – Lebanon, scientific and social studies – 1918_ ) remains true more than a century later.

This part of the Middle East was prematurely exposed to the international flows of people, goods, and capital during the first globalization. Statistics from 1912 show that 25 to 30 percent of the population of Mount Lebanon was living and working abroad. The reasons for this emigration, according to contemporaneous sources, are the repeated crisis in an economy that was heavily relying on the production and export of raw natural silk. Another reason was the high concentration of the population in Mount Lebanon with a density of 110 individuals per square kilometer, which was high compared to the international standards of that period.

# **_1. The Silk Curse: Monoculture, Deindustrialization and Emigration_**

Since the first quarter of the 19th century and the implementation of the first factories for the treatment of raw silk, Lebanese agriculture has gradually been monopolized by mulberry culture to provide mulberry leaves to silkworm breeding plants. The low cost of a large labor force concentrated in regions close to the coast and ports was the main reason that motivated foreign investors to develop silk industry in Mount Lebanon.<sup>2</sup> This exporting activity raised the revenues of Mount Lebanon and triggered an enhancement of the standard of living together with substantial

> 2 Mount-Lebanon, or the Mount Lebanon Mutessarifat (1861-1915) covered one-third of the area of modern Lebanon and was a semi-autonomous district of the Ottoman Empire created in 1861 as a consequence of the civil war of 1860 between Christian Maronites and Muslim Druses.

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