Turkey held snap elections on 24 June, out of which the ruling AKP and President Recep Tayyip Erdoğan arose seemingly triumphant. But at the heart of Erdoğan’s decision to call an earlier vote was his concern of avoiding elections in the midst of a huge economic crisis, the manifestations of which are becoming sharper by the day.
Already before the elections, the Turkish currency was going down in flames. Since the beginning of the year the Turkish Lira lost 20% of its value against the US dollar, and around 60% over the five preceding years. The instability caused by the regime’s imposition of dictatorial policies and Erdoğan’s growing unpredictability spooked foreign investors and they started to pull out from the Turkish market, raising the spectre of an economic crisis. But the regime knew the worst was yet to come.
Turkey went to the polls under those circumstances. The haste to call such early elections clearly indicated that the regime felt it did not have much time before the economic earthquake arrived. Erdoğan felt the crisis approaching and brought the elections forward to protect him from the upcoming storm, and to use state mechanisms to try and suppress possible social reactions.
After the elections
After the elections, Turkey started to gallop into an economic downfall. Erdoğan’s fairy tales regarding the strength of the “record-breaking” economy were only believed by his supporters; the “markets” did not buy one single word of them. The only record the economy broke was on currency depreciation: the Turkish Lira devaluated another 30% since the elections, exercising a tightening pressure on the wages and living standards of millions of workers and poor people.
On 10 August, US President Donald Trump tweeted about doubling the tariffs on steel and aluminium imported from Turkey, and stated that the relations with Turkey were not good. These measures officially came as a means to put pressure on Turkey to release American pastor Andrew Brunson, who was put under house arrest in Turkey due to his alleged involvement in the coup attempt against Erdoğan in 2016.
Did this escalation really take place just because of a pastor, whose name was hardly ever heard of before the recent crisis? Most certainly not. The international relations between Turkey and the USA have been tense for quite a while. Affairs such as Turkey’s purchase of the missile defence system S-400 from Russia, US support for the predominantly Kurdish YPG militias and Turkey’s support to jihadist groups in Syria, Turkey’ sustained oil trade with Iran in spite of US sanctions, all these factors have strained the US-Turkey relations. The “pastor crisis” is nothing but a pretext legitimizing aggressive moves from both parties. Trump’s punitive tariffs are a desperate attempt to bring the Turkish ruling elite back into line, which, so far, has had the exact opposite effect.
Trump’s actions not only turbocharged the fall of the Turkish Lira and shook the Turkish economy; it also gave Erdoğan a chance to prove his conspiracy theories. According to Erdoğan Turkey was facing an “international economic war” and a “conspiracy of foreign forces”. Using his dominance over the puppet media, Erdoğan portrayed himself as a victim of those foreign forces and of US imperialism. But people’s historically low levels of confidence in the strength of the Turkish economy at the moment show that the regime’s narrative is losing grip over an increasing layer of people.
The economic rout
Turkey is currently in an economic rout which has two components, internal and external, both feeding off each other.
First of all, the global capitalist system has faced, since 2008, a huge crisis and as a component of it, Turkey, contrary to some appearances, has not been exempted from it whatsoever. The crisis of 2008 was the biggest since the Great Depression in 1929. Capitalist states injected a huge amount of liquidity to save big business from a far more serious downfall. Yet what they did was not a remedy to the crisis; it only covered its symptoms, and postponed it.
The 2008 crisis was mostly based in the USA and Europe, so those countries were hit by a bigger wave compared to the so-called “emerging economies”; for some times the latter actually benefited from a flow of foreign capital, in search of more profitable investments. In that sense, Erdoğan’s claim that “the crisis will only be a tangent to us”, regarding the 2008 crisis, was partially true. But today those “developing” countries (such as Argentina, Brazil, India and Turkey) are sitting on a powder keg. Due to the overturn of the capital flow, they are now the ones expected to be hit by the biggest wave. And Turkey is one of those countries which are expected to take the hit. So much so, that the International Monetary Fund (IMF) organized an emergency unit, in case Turkey would face a huge foreign capital outflow and may demand credit.
Secondly, if we look at Erdoğan and his ruling party, what we see is an unmistakably neo-liberal party. Coming into power in 2002, the AKP and Erdoğan completed the integration of Turkey into the global neo-liberal capitalist system by enacting and promoting privatizations, low wages, flexible working hours and precarious and temporary employment.
The combination of neoliberal policies and the influx of foreign capital generated a considerable amount of capital stock in Turkey. The AKP regime encouraged the pouring of that stock onto the construction sector. However, an economy dependent on the construction sector is not sustainable. When you make an investment on construction, the surplus and the employment it creates are only temporary. This can be a profitable idea for an individual investor. But if you manage a national economy with that idea, you need to build constructions over and over again. And that is exactly what Erdoğan tried to do. He led Turkey into an endless loop of constructions. As a popular comment goes Erdoğan “buried the capital stock into concrete” i.e. creating a massive real estate bubble ready to burst at any time.
Furthermore, many Turkish companies and banks have financed their investments by using cheap access to foreign credit. For example, at the end of 2016, almost 90% of loans to Turkish construction companies were denominated in foreign currencies. As the Lira is now rapidly depreciating and the flow of foreign capital is running out, these mostly dollar-denominated debts are rising to unsustainable levels. Since many banks and financial investors, particularly in Europe, have a large exposure to Turkish borrowers, this could provoke a chain reaction with severe repercussions for the world economy. The tightening monetary policies of the US Federal Reserve and other leading central banks only make matters worse, not only for Turkey, but also for other so-called “emerging economies” heavily dependent on access to foreign capital.
Their solutions and ours
All economic crisis of capitalism comes with a bill, with a price someone has to pay. The question of who pays constitutes the core of the class struggle. Capitalism’s most favourite and obvious answer to this question is the working class. In days of economic expansion, capitalism exploits the labour power of workers, and piles up profit. However, when a crisis strikes, it lands the bill upon the working class.
The capitalists’ plans for the recovery of Turkey is no different from the one described above. In a report published in April, the IMF made some recommendations for Turkey, such as trimming public expenditure, promoting temporary employment, terminating raising the wages on the bases of inflation, and elimination of several state allowances. Likewise, the “100-day action plan”, which has been announced by public bodies in early August, offers absolutely nothing for the working class but more of the same.
Environment and Urban Minister, Murat Kurum, recently called for “self-sacrifice for the good of the nation”. But the big business moguls and speculators who made massive profits over the last period are not the ones who will be called on to make sacrifices. Workers and poor people will.
The recent $15 billion worth of financial assistance that was agreed with Qatar, and the prospect of a tightening of Turkey’s economic ties with Russia, might help the regime to “kick the can down the road” (the country’s debt and currency crisis). But it will not address the systemic and critical problems facing the Turkish economy nor prevent a time of reckoning for Erdoğan’s regime, which had built much of his political credibility on the economic growth presided over during his rule.
As the dimension of the crisis becomes clearer, an era of mass social and political questionings and upheavals will open up in Turkey. This needs to be seized by the left to build a mass and independent organisation for the working class. This makes clear the case for a socialist answer to the current crisis, based on the refusal to pay for the capitalists’ debts, the imposition of a state monopoly on foreign trade, the expropriation of the banks and major companies that control the economy, and the implementation of a socialist economic plan, democratically drawn up and managed by the working class.