BEIRUT -- Ever since Hezbollah and its allies began an open-ended protest against the US-backed government on December 1, Beirut's gilded downtown--built for wealthy Lebanese and foreign tourists--has become more authentically Lebanese. Where Persian Gulf sheiks once ate sushi, families now sit in abandoned parking lots, having impromptu picnics, the smell of kebabs cooked over coals wafting through the air. Young men lounge on plastic chairs, smoking apple-scented water pipes, and occasionally break out into debke, the Lebanese national dance.

Most protesters are too poor to afford $4 caffe lattes, but men hawking shots of strong Arabic coffee for 30 cents apiece are doing a brisk trade. Nearly all businesses are shuttered, but a few enterprising store owners have figured out how to cater to the crowd. One hair salon converted itself into a sandwich shop, selling cheese on bread with a cup of tea for $1. The smiling cashier works behind a counter filled with L'Oréal hair products.

"I never came to downtown before these protests. I can't afford to come here. If I ate a sandwich here, I'd be broke for a week," says Emad Matairek, a 35-year-old carpenter from the dahiyeh, the Shiite-dominated suburbs of Beirut. "It's well-known that this area was not built for us."

The protests are being portrayed in much of the Western media as a sectarian battle, or a coup attempt--engineered by Hezbollah's two main allies, Syria and Iran--against a US-backed Lebanese government. Those are indeed factors underlying the complex and dangerous political dance happening in Beirut. But the biggest motivator driving many of those camped out in downtown isn't Iran or Syria, or Sunni versus Shiite. It's the economic inequality that has haunted Lebanese Shiites for decades. It's a poor and working-class people's revolt.

In Riad Solh Square, amid dozens of white tents erected for Hezbollah supporters to sleep in, there is a stage with a huge TV screen and rows of loudspeakers mostly positioned toward the Grand Serail, the Ottoman-era palace where Prime Minister Fouad Siniora and his Cabinet are hunkered down. Between the tents and the palace, behind eight-foot-high coils of barbed wire, there are hundreds of Lebanese soldiers toting M-16s and sitting atop armored vehicles. Every night thousands of people gather in front of the stage, within earshot of the Serail, demanding that Siniora either resign or accept a national unity government that gives Hezbollah and its allies greater power.

A major theme highlighted by the protesters is that Siniora is backed by the Bush Administration--and that alliance did little to help Lebanon during last summer's thirty-four-day war between Israel and Hezbollah. A few days into the sit-in, Hezbollah hung a large banner from a building showing Siniora embracing Secretary of State Condoleezza Rice, over a collage of dead Lebanese children Photoshopped onto his back. It reads, "Condy--Thanks," a reference to Siniora's meeting with Rice during the war, when US officials refused to endorse a quick cease-fire. "Thank you for your patience Condy, for some of our children are still alive," it reads.

But in most conversations with people at the sit-in and protests, economic concerns quickly emerge: Siniora's government is corrupt, has failed to reduce Lebanon's crippling $41 billion public debt and has done little to improve people's lives. Shiites are especially forgotten in the country's economic planning. Many at the sit-in have been out of work for years, or lost their jobs after the recent war.

"Our country is getting poorer, and Siniora's government is not talking about it," says Hadi Mawla, a 22-year-old graphic design student who came from the dahiyeh on the protest's first day, which drew hundreds of thousands to downtown. "Our standard of living is falling, while other Arab countries are improving. We Lebanese used to make fun of other Arab countries. Now they have great big cities like Dubai. And we're going to end up like Egypt--with a very poor class, a very rich class and nothing in between."

The economic dimension to the protest can be seen everywhere. Around the square there are hand-drawn posters of Siniora sitting on a chair made of stacks of dollar bills. From the stage, a projector shines slogans highlighting economic demands onto a building that houses the ultra-chic Buddha Bar, with its two-story Buddha statue inside. The swirling projector makes its point: "No to the government of VAT" and "No to the government of seafront properties."

This class battle transcends sectarian boundaries. Hezbollah has formed an alliance with the Free Patriotic Movement, led by Maronite Christian politician and former army commander Michel Aoun. With this coalition Hezbollah is trying to prove that it's not a purely sectarian party, it's not seeking to impose an Islamic government and it's willing to ally not just with nationalist Sunnis but also with Christians. Because Aoun stresses honest government, accountability and economic equality, he and Hezbollah seemed like a natural fit. By playing up its alliance with Aoun--and downplaying its partnership with the notoriously corrupt Shiite Amal party--Hezbollah can reinforce the reputation for honesty shared by many Islamist movements in the Middle East.

Hezbollah's charismatic leader, Sayyid Hassan Nasrallah--ever skillful at tapping into the Shiite tradition of empowering the dispossessed--often highlights the class dimension of his group's campaign. "They will hear us in all the palaces of the ruling coalition," Nasrallah thundered on December 7, in a speech via video-link to the protesters downtown. He was calling for a huge turnout at a rally three days later, where crowd estimates ranged as high as 1 million. "From the homes of the poor, from the shantytowns, from the tents, from the demolished buildings, from the neighborhoods of those displaced by war, we will make sure that they hear our voices."

There's a long tradition of the Lebanese state leaving Shiites to fend for themselves and waiting for religious or charitable groups to fill the vacuum. This happened over decades, long before Hezbollah emerged in the early 1980s. Hezbollah's "state within a state" was possible only because successive governments willfully left a void in the Shiite-dominated areas of south Lebanon, the Bekaa Valley and the dahiyeh.

"The central government always liked outsourcing the problems of the south. First they gave it to the Palestinians, then they gave it to the Israelis, and they gave it to Hezbollah from 2000 to 2006," says Khalil Gebara, co-director of the Lebanese Transparency Association, an anti-corruption watchdog group. "Hezbollah does what every political party does: They went and created a dependency network."

In the 1960s and '70s, when Shiites were first making the migration from the rural south and Bekaa to Beirut and other cities, the central government left their fate to the clans and feudal landlords who held sway in the agricultural hinterlands. By 1970, when the Palestine Liberation Organization began creating bases in southern Lebanon, the Shiites were on the front line of a conflict between the PLO and Israel. A Shiite cleric named Musa al-Sadr created Amal, the first Shiite political party, which later turned into a militia. To an extent, Amal supplanted the feudal lords as protector of the Shiites.

After the Israeli invasion of 1982, Hezbollah emerged to fight the Israeli occupation. It was more disciplined and less corrupt than Amal, although Hezbollah was always dependent on Iranian funding and support. When Hezbollah's grinding guerrilla war forced Israel to end its occupation in May 2000, the militia was hailed throughout the Muslim world for achieving what no Arab army had done before: force Israel to relinquish land. With the Israeli withdrawal, Hezbollah moved into the vacuum in southern Lebanon, opening clinics and schools and providing small-business loans.

To many Shiites, Hezbollah's ascendance put them on the political map. There's a word Lebanese have used to put down a Shiite: mutawali, which roughly translates into "country bumpkin." It's a term freighted with meaning--of dispossession, prejudice, deprivation. But Shiites have appropriated it and now use it with pride. "During the civil war, we mutawalis were insulted and put down. Hezbollah gave us a new sense of dignity, and that's the most important right we can have," says Mawla, the graphic design student. "Hezbollah made it possible for us to stand, without fear, and shout from the rooftops that we are mutawalis."

In 1990, at the end of the fifteen-year civil war, Lebanon's political class chose to continue its sectarian system. The current crisis is rooted in that choice, which began with the 1989 Taif Accord, brokered by Saudi Arabia and Syria. The agreement called for all militias to disarm--with the exception of Hezbollah, whose militia was labeled a "national resistance" against the Israeli occupation. Leaving traditional warlords in place, Taif enshrined the political partition among the country's rival sects: Power must be shared between a Maronite Christian president, a Sunni prime minister and a Shiite speaker of Parliament. Each of the major players in the war seized a piece of the government and extended the sectarian system to the lowest rungs of the civil service. This arrangement was ripe for exploitation by outside powers, especially Syria, which dominated Lebanon from 1990 until last year.

One man had a chance to change the economic underpinnings of this system, and perhaps eventually cast aside its entire sectarian basis. He was Rafik Hariri, a billionaire construction tycoon who served as prime minister for most of the 1990s and until late 2004. But Hariri failed at building a healthy postwar economy. He rebuilt downtown Beirut at the expense of the hinterlands, and he focused on luxury sectors--banking and upscale tourism--instead of Lebanon's productive sectors, agriculture and small industry. Hariri was trying to return to the prewar economy, which was driven by Lebanon's role as a transit center for oil money from the Persian Gulf. But by the 1990s oil producers no longer needed the Lebanese banking system; they had Dubai.

"Everything that the government built around here means nothing to us," says Matairek, the carpenter at the downtown protests. "What they should have done was strengthen the Lebanese army. All the money they spent to fix this downtown--what's the use of it, if the Israeli warplanes were able to bomb us, and the Lebanese army wasn't able to stop it?"

The gleaming downtown became a symbol of Hariri's reign and his failed economic policies. By the time he left office Lebanon had a $36 billion public debt, or 170 percent of GDP--one of the highest debt-to-GDP ratios in the world (it's now 190 percent). For much of Hariri's term, he relied on Siniora, an old friend, as his finance minister.

Siniora's biggest triumph as finance minister was the 2002 Paris II Donors Conference, which netted Lebanon $4.4 billion in soft loan guarantees. In return Siniora promised a raft of neoliberal economic reforms: He would privatize state assets like cellphone contracts, reform the country's civil service sector and balance the budget by 2006. Nine months before the donors conference, Siniora imposed Lebanon's first value-added tax (VAT): a 10 percent surcharge on most goods except food and medicines. One of his main arguments for staying in office is to shepherd a Paris III conference scheduled for January, in which international donors are expected to contribute toward rebuilding the infrastructure devastated by last summer's Israeli offensive.

"Because of Siniora and his economic programs, we have a very flawed tax system, based on indirect taxes. Statistically, it has been shown that this system recycles money from the poor to the wealthy," says Fawwaz Traboulsi, a political science professor at the Lebanese American University. "We have a 10 percent flat income tax, but most state revenues come from indirect taxation: the VAT, fuel taxes, utility surcharges. Salaried people pay the bulk of these taxes."

Throughout his tenure, Hariri clashed with the Syrian-backed Lebanese president, Emile Lahoud. In February 2005 Hariri was assassinated in a massive bombing as his motorcade drove through Beirut's seaside corniche. Widely assumed to have been carried out by Syria or its agents, the killing shook Lebanon and cast a harsh light on Syrian hegemony over the political system. Under internal pressure and mass demonstrations, the Syrian-backed prime minister resigned and Damascus pulled its 14,000 troops out of Lebanon. After elections in June 2005, the new parliamentary majority--a coalition of Christian, Sunni and Druse parties--appointed Siniora as prime minister. For the first time, Hezbollah joined the Lebanese Cabinet, securing two seats in Siniora's administration.

Until last summer's Israel-Hezbollah war, Siniora continued with the economic policies he had begun under Hariri. Morality aside, there's one major problem with these soak-the-poor economics: They strengthen Hezbollah. In a country divided drastically between haves and have-nots, a large proportion of the have-nots happen to be Shiites, and they rely for social services not on the government but on Hezbollah. In their view, the government takes, while Hezbollah provides.

After the latest war, with Israeli bombs targeting Shiite-owned factories and businesses in the south and in the Beirut suburbs, the Shiite middle class was devastated. This has made Shiites even more dependent on Hezbollah, as evidenced by the group's handing out up to $12,000 in cash payments to everyone whose home was destroyed. The money--most likely provided by Iran--was intended to pay for a year's rent and new furniture while reconstruction begins.

Locked in a state of perpetual conflict, Lebanon today faces the same choice it had in 1990, when the civil war ended. It can replicate the political system that it had before--based on corrupt sectarian warlords dividing up the spoils of the war they perpetuated--or it can try to produce a stronger and more egalitarian system, one that isn't based on religious divisions and that won't consign its largest sect, the Shiites, to the care of an Iranian-funded religious party.

"How can we still accept this government that steals? This government that built this downtown and accumulated this huge debt?" asks Matairek, the Shiite carpenter. "Who's going to pay for it? I have to pay for it, and my son is going to pay for it after me."

Mohamad Bazzi, the Middle East bureau chief for Newsday since 2003, is based in Beirut.

© 2006 The Nation

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