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Dec 16 2017

Selin Sayek Böke: Turkey’s budget is a blow to the working class

Turkey’s official growth figures are “on steroids” and the burden of tax increases proposed in the 2018 budget, currently being debated in parliament, will fall on low income groups, Selin Sayek Böke, a member of parliament for the main opposition Republican People’s Party (CHP), told Ahval in an interview.


How do you evaluate the 11.1 percent growth figure announced by the Turkish Statistical Institute (TUIK) for the third quarter of 2017?

Let me start with my conclusion; this growth figure is controversial, it’s on steroids and meaningless. It is controversial because, despite all the calls from economists, TUIK discontinued publishing the old series and there is no way to compare the growth rates of the new series to the past ones. Since the growth rate data is not continuous, it is impossible to carry out an analysis consistent with other macroeconomic quantities and unemployment statistics, and as such it is very hard to assess if this growth number indicates a real change regarding economic activity or prosperity.

The growth number is artificially boosted - on steroids - since most of the growth is due to Credit Guarantee Fund (KGF) lending, tax reduction incentives, public and private cooperation guarantees, and increased government borrowing. This kind of growth is not sustainable without the help of similar financial support mechanisms and/or expansionary lending.

It is meaningless because; it does not address the unemployment, inequality, and de-industrialisation problems that Turkey is experiencing right now.

On the other hand, when we look at quarterly data, the economy is slowing down. Quarter-to-quarter growth rates dropped to 1.2 percent in the third quarter from 2.2 percent in the second quarter. This performance puts Turkey in fifth place among the G 20 countries after Indonesia, China, South Korea and India. Moreover, aside from the third quarter of 2016, this is the weakest third quarter performance since 2009.

 

You are saying that this quarter's growth performance was one of the weakest since 2009, but the government seems to be pleased. How does this growth number reflect on normal people's lives?

While millions are living on a net minimum wage of 1,404 TL ($363), the hunger threshold is 1.567 TL. The annual CPI, which was 7 percent in November last year, is 13 percent this year. Millions of people are either unemployed or are living below the hunger threshold.

We are saying that if the growth rate is indeed 11.1 percent, let's increase the minimum wage for 2018. This is part of the budget negotiations and is being discussed right now. We are proposing an above-inflation raise to the minimum wage to restore workers’ purchasing power.

Selin Sayek Böke

How do you evaluate the proposed 2018 budget?

Unfortunately 2018 might be another lost year for the Turkish economy. The AKP government's proposed 2018 budget is favours capitalists and is biased against the working class. This is obvious from both the expenditure side and the revenue side of the proposal.

The proposed budget does nothing to address working class peoples' problems like adequate wages, job security, or unemployment. So, in essence, the working class is not being represented in the proposal. There are no policy proposals to strengthen production infrastructure or to encourage industrial production. There are no incentives to manufacturers who create added value. There are no social policy proposals to promote social justice or an equitable tax system. In short, the poor, the retired, the low and middle-income people are not represented in the AKP (Justice and Development Party) 2018 budget.

Well, who is represented? The rentiers, and the palace regime are. We are saying that the 2018 budget is perpetuating the same policies we have seen from AKP governments in the past.

Right now, in Turkey, economic growth is not reducing unemployment rates. It is not sustainable. The structural problems of the economy increase the country's dependence on external borrowing and exacerbate economic fragilities. And all of these issues are ignored in the 2018 budget.

This proposed budget does nothing to tackle inequality problems or solve the significant labour market issues. Moreover, women’s issues are not addressed in this budget; there is no investment in public education either.

Overall this budget merely tries to perpetuate a system that does not work for many. The existing development model is “growth without employment". In other words, the 2018 budget, which is based on the economic model of the palace regime, puts all the burden once again on the workers' backs, with tax hikes and price increases.

Selin Sayek Böke

There is speculation that taxes, fees and penalties will be increased by 15 percent in 2018 to reduce the budget deficit. However, the tax burden on the average citizen is getting heavier. How do you think Turkish people will react to this increased burden?

The 2018 budget is a short-sighted solution that aims to sustain the AKP's consumption-based and debt-based growth model.

Turkish national debt has continually increased under AKP governance. The debt to GDP ratio went up to 212 percent in the second quarter of 2017 from 144 percent in early 2001. Obviously, this is not sustainable.

With this proposal, low and middle-class workers will have to pick up the tab. For example, 86 percent of budget revenues are estimated to be financed by tax income, and only 30 percent of total taxes are indirect. In OECD countries, however, the share of indirect taxes to total taxes is around 66 percent. Moreover, a significant portion of indirect taxes in Turkey is the withholdings of employees.

 

The 2018 budget proposes an increase in defence spending to 88 billion TL. What is the reason for this increase?

The main reasons are the government’s decision to prolong the state of emergency (OHAL) and their adventurous foreign policies. The proposed increase for the Ministry of National Defence budget and Gendarmerie General Command budget is more than 40 percent. This shows that not only OHAL will continue, but also the social and economic costs of the adventurous foreign policy risks are being transferred to the average citizen.

 

A considerable appropriation is allocated to the Religious Affairs Administration which last year spent its annual budget in the first 7 months.

To put that in perspective consider this: the educational budget share in the 2018 budget is reduced 1 percentage point from the previous year, to 2.7 percent. The education budget was already well below the OECD average of 6 percent. This to me along with the increase in the Religious Affairs Administration’s budget shows AKP's disregard for education.