Is Turkey Thriving?

On 27 May 2013, Jeffrey Sachs of Columbia University published a commentary titled “Why Turkey is Thriving?” at Project Syndicate. He argued,  “Long-term growth stems from prudent monetary and fiscal policies, the political will to regulate banks, and a combination of bold public and private investments in infrastructure, skills, and cutting-edge technologies.” I was tempted to use the title “Turkey is Not Thriving” for this article, but Emre Deliveli of Hürriyet Daily News used that title already in his response to Sachs a few days later. I have nothing significant to add to Deliveli’s arguments. There is no doubt. Turkey is not thriving. Which country is thriving in these days?

Coincidentally, 27 May 2013 was also the day the Gezi Park protest that triggered the ongoing uprising in Turkey started. In 2006, another Columbia professor, Frederic Mishkin coauthored the report “Financial Stability in Iceland” praising the financial soundness of Iceland about two and a half years before the Icelandic financial system collapsed.  It is difficult to say whether Mishkin or Sachs was unluckier with the timing, because the “economic miracle” of the governing neoliberal Justice and Development Party (Adalet ve Kalkinma Partisi, AKP) in Turkey has not collapsed yet.

A related debate took place between Dani Rodrik of Princeton University and Finance Minister of Turkey Mehmet Şimşek on Twitter. Emre Deliveli joined the debate from Hürriyet Daily News on 21 June – two days after the heated exchange between Rodrik and Şimşek. Deliveli summarized the exchange as follows. “It started when Rodrik tweeted a correction from The Economist: “In last week’s briefing, we said that Turkey’s GDP per person had tripled in the past ten years. This was true only in nominal terms. In real terms, GDP per person has risen by just 43 percent. Sorry.” Şimşek countered, arguing that the correct way to measure GDP was in nominal dollars.” Deliveli’s humorous “Macroeconomics 101 for Finance Ministers” article not only is a good read, – humor has been the deadliest weapon of the protestors against the AKP since 31 May – but also contains a screenshot of the entire exchange between Rodrik and Şimşek.

To make the matters worse, another salvo came from another heavy weight economist, Daron Acemoğlu of MIT. Acemoğlu told a small group of journalists on 22 June before a speech at İstanbul Bilgi University, “The Turkish economy is at greater risk right now, but this is not about the countrywide protests. The Fed’s latest decision to end the liquidity party had been expected for a long time, and is not surprising. The expected move has affected many emerging and developing economies negatively for more than three weeks. The Turkish economy, however, has been affected most due to its structural weaknesses, particularly its high current account deficit.” But, of course, Acemoğlu is an Armenian citizen of Turkey and his hostility toward the economic miracle of the AKP is only expected.

Given Prime Minister Recep Tayyip Erdoğan’s now world-renown search for conspirators including an “interest-rate lobby” who planned the ongoing protests to bring down Turkey way ahead of time, I would not be surprised if Rodrik, Deliveli and Acemoğlu had already been promoted by some AKP officials to the ranks of conspirators jealous of the economic miracle of the AKP. It is possible that even I may find a place in the long list of conspirators after this article. There is another possibility.   Ankara Major Melih Gökçek, an elected official of the AKP, may tweet a link to this article and accuse me of being an agent of India. I am writing in Mumbai, and both India and Turkey had been among high growth emerging markets. Would it not be nice for India to bring down one of her strongest rivals?

When Selin Girit, a Turkish reporter from BBC’s Turkish service, tweeted a proposal from one of the ongoing park forums in İstanbul, Gökçek started a hashtag war accusing Girit of being a foreign agent. In a series of tweets, Gökçek claimed the following.

“Led by England, they are trying to collapse our economy via agents hired, both nationally and internationally. They are dreaming for Turkey to be the “Sick man of Europe” once again. Here is a concrete proof.”

A large number of threatening messages were sent to Girit after Gökçek named and attacked her. Of course, Girit is not the only one who has been named by elected AKP officials and received life threats. There have been many.

The original tweet of Girit was this.

“A proposal from the forum at Yoğurtçu Park: Let’s not be the standing man, but the man that stops. Let’s stop the economy. Don’t consume for six month[s].”

“It is the economy, stupid.” The question is why the economy is so important to the AKP, despite that the AKP secured about 50% of the votes in the last election in 2011. Is 50% of the population of Turkey not devout Muslims who would support the Islamist AKP under any condition?

An answer comes from another “foreign agent”, David Goldman (aka Spengler) of Asia Times. I leave the determination of whether Goldman is a paid agent of Botswana, Madagascar or Belize to Gökçek. Whether Goldman is a foreign agent or not, however, he wrote this in his 3 June article titled “The Economics of ‘Turkish Spring’”.

“Only a small minority of the AKP base, moreover, favors its Islamist agenda. Only 12% of Turks want Sharia to be the law of the land, according to an April 2013 Pew Institute survey, compared to 84% of Muslims in South Asia, 77% in Southeast Asia, and 74% in the Middle East and North Africa.

That is why Erdoğan’s mandate rested on economic performance. His Sunni fundamentalist agenda does not appeal to the Turkish majority. But he drew votes from secular Turks on the putative strength of his economic management.”

Who knows what these Asia Times and Pew Institute are and with what intergalactic intelligence agencies they are associated? Maybe they are associated with some, maybe not, but Goldman has been arguing for an AKP fueled credit bubble in Turkey since the early 2012 over at Middle East Forum. He is clearly a conspirator, even if he is not a foreign agent.

It does not end there. As if with the intention of adding fuel to the fire Goldman Sachs and the Washington based Institute of International Finance made public statements on the vulnerability of Turkey to capital outflows on 21 June and 26 June respectively. On 21 June Goldman Sachs said, “Brazil’s real, Chile’s peso and Turkey’s lira may fall “significantly” to curtail widening current account deficits. The lira, South African rand and India’s rupee would need to depreciate about 30 percent on a trade-weighted basis, while the real and peso need to fall about 20 percent.” And, on 26 June the Institute of International Finance said, “Turkey, Romania, Poland and Morocco are among the countries most vulnerable to slowing investment in developing nations because of their dependence on foreign financing.” Is this not a concrete proof of an “interest-rate lobby” consisting of national and foreign financial institutions that want higher interest rates in Turkey?

Although the rest of the world learned the term “interest-rate lobby” only after the onset of 27 May 2013 uprising, this term is not new either in Turkey or in Wall Street.  For example, about a year and a half ago on 11 January 2012 in Ankara Erdoğan said, “The interest-rate lobby is working and on the attack right now.” The term has been in circulation in Turkey for many years – if not for decades – and its origins may be traced back to 1985. In 1985, the central bank financing of the government halted in Turkey. The Turkish Treasury started auctioning government bonds only to the banks and other financial institutions at high interest rates regularly and the then Central Bank of Turkey Deputy Governor Rüşdü Saracoğlu established the interbank money market in 1986.

Indeed, there is an Indian counterpart of the term “interest-rate lobby”. It is the Indian term “lazy bankers”. The godfather of the Indian term “lazy bankers” is no other than a former Reserve Bank of India (RBI) Deputy Governor, Rakesh Mohan. Mohan criticized the banks in India for being “lazy bankers” – a clique consisting of bankers who buy government bonds beyond reserve requirements I presume – in 2002 at the annual bank economists’ conference in Bangalore. Coincidentally, the origins of the term “lazy bankers” may be traced back to the end of the central bank financing of the government also in India.  The Indian government started to sell all of its bonds to the banks and other financial institutions at high interest rates in 1994 and, in 1995, the RBI direct purchases of the government bonds was banned.  Yet, there was nothing wrong with what those “lazy bankers” were doing. They were not lazy. Is it not most rational to lend to that entity with the lowest risk, yet with very high return?

When Erdoğan uses the term “interest-rate lobby” he means nothing but “finance capital” – a term whose history goes back to Marx, if not to earlier. Either Erdoğan and/or his speechwriters have not read Hilferding’s “Finance Capital” written in 1910 or they do not want to use the term for ideological reasons.  Maybe, “finance capital” is too difficult a term to communicate to the public? Or, maybe, because interest is sin in Islam the term “interest-rate lobby” is better suited to the supporters of the Islamist AKP? What Erdoğan possibly does not know or say however is that finance capital does not care about this or that country.

Finance capital in general, and banks in particular, rose to prominence in Turkey after the ongoing neo-liberal regime was installed by the International Monetary Fund (IMF) which on 24 January 1980 approved an economic “stabilisation” programme in exchange for loans when a balance-of-payments crisis hit Turkey in 1979. And, the implementation of the programme was guaranteed by the Turkish military with the coup d’état of 12 September 1980. Indeed, not only the prominence of the banks, but the AKP ­itself is an offspring of that neo-liberal programme whose seeds were sown on 24 January 1980 and watered on 12 September 1980, although both the banks’ and AKP’s roots go back to much earlier times. Finance capital in general, and banks in particular, rose to prominence in Turkey after the ongoing neo-liberal regime was installed by the International Monetary Fund (IMF) which on 24 January 1980 approved an economic “stabilisation” programme in exchange for loans when a balance-of-payments crisis hit Turkey in 1979. And, the implementation of the programme was guaranteed by the Turkish military with the coup d’état of 12 September 1980. Indeed, not only the prominence of the banks, but the AKP ­itself is an offspring of that neo-liberal programme whose seeds were sown on 24 January 1980 and watered on 12 September 1980, although both the banks’ and AKP’s roots go back to much earlier times.

Since the implementation of the 24 January 1980 neoliberal program required an obedient work force to ensure cheap labor, the 12 September 1980 military junta – adamantly supported by the Industrialists and Businessmen Association of Turkey (Türkiye Sanayici ve İş Adamları Derneği, TÜSİAD) or the İstanbul bourgeoisie – crashed the left brutally and suppressed the labor unions. Another tool of the junta among many others was to encourage religion against radical ideas and the left. Religion courses were made mandatory throughout the grade school and the religious high schools proliferated. And, shortly after the end of the junta in 1983, one of the largest Islamic congregations, the Fettullah Gülen Congregation started to organize in the police force and eventually captured almost all of it. It is this brainwashed police force associated with the Gülen Congregation that has been attacking the protestors around the country in the name of God since May 31.

The objectives of the 24 January 1980 “stabilisation” programme were a reduction of state involvement in production; an increased reliance on the markets; a switch from an inward looking economy to an export oriented one, and the attraction of foreign investment – direct, I presume. After the declaration of the program Turkey signed three stand-by agreements with the IMF and five structural adjustment loan agreements with the World Bank between 1980 and 1984.  While the solutions offered by the IMF programs were short-term and consisted of such recommendations as devaluing the currency to increase exports and restricting money supply to control inflation, the long-term solutions of the World Bank structural adjustment programs aimed at transforming an inwardly-oriented economy to an outwardly-oriented one. These World Bank structural adjustments included trade and financial liberalization; export promotion; privatization of the public enterprises and fiscal restructuring, that is, austerity.

This is how it all started and the main outcome was rise to prominence of the finance, real estate and insurance sector in Turkey, as well as tourism. And, the game of rent collection had begun. The AKP has been nothing but the last agent of this ongoing neoliberal transformation in Turkey.

In a recent interview with Brasil de Fato, João Pedro Stédile, national coordinator of the Movement of Landless Rural Workers, analyzed the economic roots of the ongoing Brazilian uprising as follows.

“There have been many opinions as to why these protests occurred. I agree with the analysis of Professor Erminia Maricato, who is one of our best specialists in urban issues and has worked in the Ministry of Cities under Olivio Dutra. She defends the thesis that there is an urban crisis in Brazil’s cities, a result of the current stage of financial capitalism. Due to an enormous amount of housing speculation, rent and land prices have increased 150% in the last three years. Without any government control, financial capital has promoted the sales of cars in order to send profits overseas and transformed our traffic into chaos. And in the last 10 years there has been no investment in public transport. The housing program “My home, my life” has driven the poor out to the periphery of the cities, where there is no infrastructure.

All this has generated a structural crisis where for people, large cities have become a living hell where they lose three or four hours a day in transit which they could instead be using to spend with their family, studying or participating in cultural activities. Added to this is the poor quality of public services, especially health and education, from the primary and secondary level, where children leave without being able to write. And university education has become a business, where of 70% of university students’ diplomas are sold on credit.”

And, in a recent interview at OpenDemocracy, Samir Amin, an Egyptian economist, described his views of the economic reasons behind the second revolution in Egypt, unfortunately captured by the military once again, as follows.

“Millions of people signed their names after giving deep political consideration to what they were doing: something totally ignored by the international mainstream media. They represent the majority of all the electoral constituencies, but they do not have any voice. The Muslim Brothers wield political power and like to think they can control 100% of the votes. Thus, they ensured members of the movement in every public sector.”

“Islamists have only ultraliberal answers to give to the crisis: they have replaced the capitalists’ bourgeois clique that were Mubarak’s friends with reactionary businessmen. Moreover, their goal is quite simply to sell off public goods.”

“It is theft to attach derisory prices to goods that are worth billions of dollars. These are not the usual privatizations that reactionary regimes indulge in, selling off goods at their economic value. This is pure fraud more than a privatization.”

Put Stédile and Amin together, and you are describing the thriving Turkey of Sachs, more or less. If you see any resemblance between your country and these three countries, namely, Turkey, Brazil and Egypt, you can be certain that the elites of your country are trembling.

T Sabri Öncü  is a citizen of Turkey, living in Mumbai. He can be reached at:

This article originally appeared on Economic and Political Weekly.