What Burgernomics tells us about the economic crisis in Lebanon

It tastes the same, the packaging is the same – but the different costs of a McDonald’s Big Mac may contain clues to a country’s economic health, and in Lebanon the diagnosis is not correct.

If fast food is your drug of choice, Bliss Street in West Beirut lives up to its name.

Between the Hamra district and the American University of Beirut (AUB) campus, it’s a sparkling strip of fast and fatty eateries. Independent restaurants and chain restaurants line up, serving pizza, donuts, shish tawouk, and fried chicken. Hungry students are welcomed.

The prime position on the Strip is reserved for the biggest name in fast food. Directly opposite the entrance to the university is a McDonald’s, with its golden arches battling for dominance against the bougainvillea spilling onto the walls of AUB.

For those studying in the university’s economics department, the restaurant is more likely to be a place for a snack between classes than a place for financial analysis. However, the global fast food chain can provide a quick and easy overview of a country’s economic situation.

In the UK this week, McDonald’s revealed the double shock of Brexit and Coronavirus to a thirsty population. Unable to provide customers with milkshakes and bottled drinks, problems with supply chains, international trade and the tight UK labor market were clearly felt by the public through fast food.

A Big Mac may not be the healthiest dinner choice, but the internationalization and standardization at the heart of the “Mc business model” can provide an indicator of a country’s economic health. Since restaurants are franchised in almost every country in the world, with very little room to turn away from the American original, any deviation from the “norm” is usually a sign of economic and political problems in the world. adopted country of a restaurant.

Lebanon is a prime example, with the country’s current economic and political crisis reflected in the cheapest Big Mac in the world.

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Big Mac economy

The Big Mac Index is the most well-known McDonald’s-based economic analysis. It was invented by The Economist in 1986 as a measure of how undervalued or overvalued currencies in a world market. It is based on the concept of purchasing power parity (PPP), which suggests that, if currencies are properly balanced, a basket of goods in one country should cost the same as another taking into account the rate of exchange. exchange.

According to The Economist, Burgernomics is not an exact science. Rather, it is a “tool to make exchange rate theory more digestible”. The highly simplified and ironic model may, according to Simon Cox, senior economics writer at The Economist, “Occasionally reflect certain rather sad economic events around the world”.

The radical outliers of the Big Mac Index are often a symptom of deeper economic, political or societal problems. Venezuela – facing an extreme economic and political crisis – currently has the most expensive burger in the world, with The Economist suggesting that the 30,164,100 bolivar cost of a Big Mac means that the currency is overvalued by 47.7%.

Some of the most undervalued currencies, according to the index, are the Russian ruble, South African rand and Turkish lira, with Big Mac prices in those countries reflecting an undervaluation of nearly 60%.

The Lebanese pound (LBP), however, falls well below these. A Big Mac on Bliss Streets costs 35,000 LBP – around £ 1.35. Therefore, The Economist estimates the currency to be at least 70% undervalued, making it the cheapest Big Mac in the world.


Economic crisis

The currency crisis is but one symptom of a vast, interconnected and ongoing economic and political crisis in Lebanon that began long before the shocks of Covid-19 and the explosion at the port of Beirut, which left more than 200 dead in 2020.

The World Bank’s Lebanon Economic Monitor (LEM) described the country’s current financial problems as one of the three most severe global crises since 1850. Between 2018 and 2020, GDP fell by about 40 percent and half of the population would now live below the poverty line. line.

Understandably, the price of a burger is low on most Lebanese’s list of concerns. But, at Hamra’s McDonald’s, restaurant manager Dana nibbled on a box of fries and explained how the crisis had impacted her and her employees.

“There is no fuel, no electricity in the house,” Dana explained. “These are the minimum requirements for living like a normal person.”

This month, fuel shortages have amplified the chaos. Endless lines of cars waiting to buy gasoline clog city centers and create mile-long traffic jams along highways. Queues last for hours, fights break out, sometimes with deadly consequences.

The hoarding of this now scarce commodity has also produced equally disastrous results. Two weeks ago, a tanker truck containing illegally hidden fuel exploded after being seized by the Lebanese Armed Forces. The explosion killed at least 28 people and injured many more.

But the problem is far from being resolved. Attempts by Lebanese authorities to manage shortages by removing fuel subsidies can lead to huge price hikes, pushing those who depend on oil for their livelihoods into increasing precariousness.

Ashes of BeirutOne year after the port explosionLebanon is on its deathbed

It’s not just the country’s cars that depend on depleted resources. The corrupt and incompetent public electricity supplier has long been unable to provide adequate electrical coverage in the country, which means most people depend on fuel-powered generators to power their homes and businesses. As fuel runs out or the price rises, long outages become the norm. This is particularly troubling for hospitals, which now have to ration electricity while dealing with a multitude of coronavirus patients and a workforce seeking to migrate where possible.

Dana tells me that coming to work at McDonald’s is a relief. The restaurant is one of the few places in town with a stable enough power supply to run the air conditioning.

“In Lebanon, it’s impossible to think about the future, we just can’t, we live from hand to mouth,” she says sadly before returning to finish her shift.

The cheapest Big Mac in the world tasted the same as anywhere else. Both patties have the texture and appearance of wet cardboard. Always delicious.

While the government-imposed wheat subsidies may have deflated the cost of hamburger buns slightly, its unusually low cost is just another small sign reflecting a much larger disaster of economic and political mismanagement in Lebanon.

Outside is a fleet of mopeds, ready to fly the “McDeliveries” over the city. Haidar Mahmood sits perched on one of them, keeping an eye on the hatch where orders are passed to the waiting drivers.

He has been working as a rider for over a year and knows full well that he delivers the cheapest burgers in the world. His salary, paid in pounds sterling, fluctuated with the exchange rate, meaning that some months he receives the equivalent of $ 30, while others could approach $ 70.

“It’s still around $ 50,” he said with a big smile, not letting the mention of the economic uncertainty dampen his mood.

It is a reminder that while “burgernomics” can be a useful gadget for spotting economic crises, it tells us nothing about the real impacts of such events. In Lebanon, these are most clearly felt not in the price of a Big Mac, but in the daily struggles and uncertainties that result from a fragile economic situation that, for the most part, people like Haidar Mahmood and Dana had no part to orchestrate.

I asked Haidar if he was positive for the future. He shrugged, still smiling.

“We are working to be able to eat,” he said. “I don’t think much else.

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