Erdoğan’s economic views come under scrutiny

After Erdoğan prompted a minor currency crisis by telling London-based investors that he intended to force the Turkish Central Bank to reduce interest rates on May 14, Borzou Daragahi wrote for Foreign Policy about the divergence between mainstream economics and Erdoğanomics.

For one thing, Daragahi said, Erdoğan believes that interest rates cause inflation, whereas traditional economists believe that the opposite is usually the case.

“His apparent belief in cheap credit is linked to a conviction that Turkey can grow without any limits and without overheating and exacerbating inflationary pressures,” Daragahi said.

“Erdogan seems convinced Turkey’s economy can grow at up to 7 percent annually without any side effects. But economists caution that unrestrained growth can actually hurl a country into a recession, with inflation — currently running at about 10 percent — eating into consumer savings and earnings.”

Erdoğan also believes that international investors are solely focused on their own bottom lines to the extent that very little will put them off, Daragahi said: while this is not entirely untrue, his government’s seizure of assets and fights with the home countries of many of his biggest investors increases their risk perceptions and makes them less likely to invest as much.

Another belief of Erdoğan’s is that foreigners are responsible for deliberately provoking Turkey’s economic troubles, Daragahi said.

“Even after Erdogan stood aside to let his financial team raise an important lending rate on Wednesday, he framed it as a way of fighting the dollar, and his deputies described the lira’s woes as part of a conspiracy by unnamed conspirators meant to hurt Erdogan politically, tapping into Turkish nationalism,” he wrote.