No way out of Turkey’s economic crisis

Economic crises are nothing new in Turkey. Turks have lived through several of them in recent decades.

Though there are differences between them, Turkey’s economic crises share many common elements. Among these, the state’s failure to sustain a pro-market policy looms large. A traditional weakness of the Turkish state tradition is its unwillingness to recognise any space for autonomous economic actors.

The ruling Justice and Development Party (AKP) has for some time weakened the market environment, and this fact, apart from international factors, has played a key role in the current economic crisis. But from a historical perspective, it is just the Turkish state tradition of violating the market when political leaders need to.

Meanwhile, Turkish society, which lacks a European-type strong bourgeoisie, has always enabled the state to destroy the market environment without major social friction.

The Anatolian people are still largely organised as villagers, townsmen or newly urbanised city-dwellers, lacking Western-style social classes. As a result, there has never been a resilient social class in Turkey to force the state to adopt a pro-market, or pro-labour position.

Turkey’s current economic crisis also reflects this classical problem of statehood. As in previous cases, the AKP government has destroyed the rational relationship between state and economy.

Today, the AKP-controlled state is no longer able to maintain a rational relationship with the economy, which results in two major problems; the excessive expansion of the state and the abnormal increase in public expenditure.

As a result, the state’s enormous expansion has given way to an absurd mode of development that could ironically be named a ‘luxury development model’. This model has ambitious aims such as constructing a hospital for each town, or an airport for each city.

Many mayors who have such ‘genius ideas’ for their cities are the agents of the same luxury development model. They never refrain from spending millions of dollars on projects like cable cars, trams, and artificial waterfalls.

On a tour of Turkey you could discover many failed ‘grand projects’ that cost billions, like Istanbul’s Formula 1 Racing Circuit, or Zafer Airport in the western town of Kütahya.

The Istanbul Formula 1 Racing Circuit cost almost $250 million and is currently being used as a car park. Fewer than 5 percent of the anticipated number of passengers use Zafer Airport, which was to be the fourth biggest in Turkey.

But beyond the abnormal increase in state expenditure, more alarming is the state’s weakening and even destruction of the legal basis of the market economy. This also damages many Turkish companies that strive to produce and export without recourse to public funds.

Thus, in the case of the AKP-run state, we face two major problems: the state is not only continuously expanding, it also destroys the normative basis of the market economy. Naturally, the state’s arbitrary policies intimidate business people across the country.

The Turkish state once again fails to realise that economic affairs are not only labour-intensive works, but also works that require some intellectual quality.

Economic activity requires autonomy, freedom and legal protection in the judiciary, journalism and academia. Unfortunately, the term autonomy has become stigmatised by the Turkish state tradition.

Frustrated by the government’s recent arbitrary interventions in the markets, many businesspeople have taken their wealth and investments to other countries. Similarly, many of the highly skilled and educated people the Turkish economy depends on are leaving Turkey in droves.

So, is a shift back to market-oriented policies realistic?

The answer is “no” for four reasons:

Firstly, such a change requires President Recep Tayyip Erdoğan to admit his economic policies have failed. Erdoğan will never do this.

Secondly, the rise of state expenditures is possible through a large network dominated by AKP supporters. This huge entangled web, which simply runs on public funds, will never accept a shift back to a competitive market-oriented system.

Thirdly, given that the real economic actors are in deep crisis, economic development is sustained mainly through public expenditure in Turkey. Thus, for the AKP to stop such a policy is tantamount to suicide. The case of the AKP is like a man who survives with a knife embedded in his stomach because pulling it out would mean death through loss of blood.

Fourthly, Turkey is now an authoritarian country. A shift back to market-oriented policies requires some degree of normalisation, i.e. democratisation, which could be politically lethal for Erdoğan.

Finally, ideology matters. The AKP is an Islamist party with an agenda of Islamising Turkey and that would always require some degree of authoritarianism. And we should never forget that Islamism sees the state as the main agent of social change. Therefore, Islamism is always destined to end up with a kind of statism in the economy whether in its radical or populist form.

The opinions expressed in this column are those of the author and do not necessarily reflect those of Ahval.