Fikret Adaman, one of Turkey’s leading critical economists, sees bigger problems for Turkey’s economy than the current currency crisis.
OM: Dear Professor Adaman, economic experts around the world are criticizing President Erdogan for pumping ever more money into an economy that is already suffering from inflation and a steep fall in value of the Turkish Lira. How do you see Turkey’s economic development under the AKP government?
FA: I partly agree with the analysis of most economists: Turkey’s development over the last two decades has been based on getting hot money and putting the bulk of it in the construction sector, building housing and office towers, but also bridges, airports, highways and so on. This has energized the economy, creating demand in other sectors as well and thus created jobs and raised the level of prosperity for many people.
OM: Seems like a winning strategy…
FA: Well, it is good to have new infrastructure, but the construction sector does not bring back much added value. At the end of the day, you need to get additional money to be able to pay your debt to keep continuing on that same path, which was basically the economic model that the AKP followed for a long time and still follows to some extent. This works as long as you are able to reach external funds. If this inflow abates, you will have serious trouble which reflects the current situation of the Turkish economy.
OM: And where do you disagree with other economists?
FA: To me, the picture is bigger than the current crisis. The problem that I just laid out is just the financial-growth part. There are two other components that are part of a bigger problem with Turkey’s development, even before the current situation. One is ecological - Most of the activities in the construction sector come with serious ecological burden in terms of carbon footprint, pollution, land grabbing and deforestation. The other component is the social cost, by which I mean that about one third of employment happens in the shadow economy without much social safety like pensions and without literal safety: about five to six people are dying each day in Turkey from industrial accidents on construction sites, in mines or the transportation sector. So while I agree with the analysis of the monetary problems of the Turkish economy, these two components are at least equally important.
OM: Some people say that there is opportunity in crisis. A long shot: The government is currently rethinking its economic policy?
FA: (laughing) I doubt it. First of all, Erdogan pretty much denies that there is a crisis. And secondly, the current development model is generally working for him. He seems to be able to keep the Lira at an exchange rate of nine or ten on the US Dollar and remain politically strong.
OM: But what about the lost elections in Ankara and Istanbul? Are those not signs of some former AKP voters being fed up with the political climate, but also signs of frustration with the economic downturn?
FA: Sure, but overall, the majority of the country still approves his rule. This is what matters to him. The bulk of the AKP constituency has no direct links to Europe, they do not travel abroad, have no business abroad, they do not really depend on imported commodities and so on.
OM: But rising prices, food prices in particular, are surely hitting his base hard…
FA: So far, he is able to buffer a lot of this through a set of subsidies to those affected.
OM: In your 2017 book, you called Turkey’s development path ‘neoliberal’. How does subsidizing the poor fit into that assessment?
FA: The ensemble of social policies that the AKP has been following is a case in point for neoliberal development. They changed it from a rights based automatic support system to a basic aid type policy. At the same time, it is a patronage system that serves the AKP. If you need support, you have to find your way, have to make the right connections. Most of the subsidies are given out by the municipalities which in turn are often controlled by the AKP. So it is a mix of neoliberal marketization of the individual with a strong flavor of clientelism.
OM: Besides social policy, what makes Turkey’s development neoliberal to you?
FA: For me, neoliberalism is promoting the idea of market ideology in every aspect of life. This doesn't mean that the state should always stay outside the economic process, on the contrary in some cases the state has to take the leading role. Market ideology and growth by any means has been very dominant in Turkey and AKP policy. Me and some colleagues have been questioning this kind of developmentalism, but the paradigm is so strong that challenging it on the grounds of it not being ecologically sustainable or coming with grave social costs does not have much of an impact on the minds of people, whether AKP supporters or not.
OM: This leads us back to the current issue of elections and the hype around the CHP, do they have something in store on the economy?
FA: Not that I’m aware. I think this is a serious problem, that the CHP does not have a real alternative economic plan and the HDP has always been so occupied with the ethnicity issue that they did not pay much attention to the political economy of the country and the kind of developmental path we should be following. So we are in a situation where more or less everyone has the same development trajectory plan and Erdogan does it well. So many people feel: Sure it comes with some cost, but you know c’est la vie. And that is how the system has been able to reproduce itself. There is no serious discussion on the structural reasons for the ongoing income and wealth inequality. Why? Mainly because of the fact that the poor are either supporters of the AKP or of the Kurdish party and they are motivated by non-economic reasons, at least at the moment. “Yes, we are poor, but let’s focus on the Kurdishness”, “Yes, we are poor but let’s see whether we can build more mosques.”
OM: So given the lack of an alternative plan from CHP and HDP, what is your alternative vision for Turkey’s development?
FA: I think Turkey - and other countries for that matter - need a policy that combines a green jobs program with a set of tax incentives towards growth that is driven by research and development, instead of more and more resource input. At the same time, higher environmental taxes should be introduced along side targeted social transfers to poor and vulnerable households to help mitigate negative distributional effects. These policies might have a slight negative effect on GDP growth potential as studies by the World Bank have shown, but these same studies also show gains of health benefits from reduced pollution, resource use efficiency, and other ecosystem benefits that can be monetized to compensate for GDP losses.
OM: Two final questions, Professor Adaman: One: What do you think is the biggest misconception in “the West” about the political economy of Turkey?
FA: Well, I think the big misconception was to perceive Erdogan’s early moves as genuine democratic openings. You cannot live a double live: on the one hand promote human rights and democracy, which Erdogan did in his first five to six years; and at the same time rely on Mafiosi networks. The Erdogan government relied to a bigger extent than previous governments on informal social networks. From the beginning. And once you get your power through informal networks, things may easily get out of control. Because there is always the question of distributing the cake among these informal power networks…
OM:…Especially when the cake gets smaller..
FA: Exactly, as soon as there are even signs of the cake maybe getting smaller. Then brothers may turn on each other. And that is how I would interpret the attempted coup in 2016, which in turn was the beginning of Erdogan becoming who he is today in terms of his political "style”.
OM: And the very last question: What do you think was or is Erdogan’s biggest mistake in economic policy?
FA: Personally I think, the biggest mistake has nothing to do with Erdogan directly, it’s more structural. It is to understand development as a growing economy. This thinking of “Whats your performance? Tell me your growth rate and I’ll tell you how good your policy is”. This simplistic vision is the biggest mistake. Not only in this country of course. It puts all ecologic and social costs aside and simply lets marginalized groups who have no agency, shoulder these costs. Or postpones them to the next generation.