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President Erdogan has overseen incredible economic growth during his tenure as President of Turkey. The Turkish middle class expanded, poverty rates lowered, and foreign investment poured in. His Justice and Development Party (AKP) won 42% of the vote in 2004 with Erdogan serving as the Prime Minister. Erdogan was able to successfully consolidate power for himself and his party, the AKP.
Despite earlier successes, the Turkish economy is crashing. The Turkish currency, the lira, plunged 8% on December 17th. This year the lira has lost 55% of its value against the American dollar. Of that 55%, a 37% loss has occurred in the last 30 days. Inflation is skyrocketing. Government statistics state that the inflation rate is at a massive 21.3%; critics of the government and opposition figures believe that this is probably underestimating the issue. In Istanbul, the price of wheat has gone up 109% and natural gas is up 102%. The youth unemployment rate is at 25%. Widely recognized indicators of economic health are looking dire in Turkey; more importantly, the crisis is making Turkish people suffer.
The key to understanding the current crisis may lie in the causes of Turkey’s earlier successes. President Erdogan pursued big, ostentatious growth in his first decade governing Turkey, as Prime Minister. That meant high spending on infrastructure, encouraging people and businesses to incur debt, and seeking out foreign investment. The strategy worked initially and elements of its underlying logic hold sound. Improving infrastructure, despite incurring high government spending, allows for meaningful growth and development in that it increases quality of life for citizens. Publicly incurred debt can be used for social welfare, development of industry, and to stabilise a fluctuating economy. Private debt, below a certain threshold, encourages consumption and stimulates the economy. However, high rates of borrowing are rarely a sustainable economic practice.
Turkey’s economy has been plagued by low interest rates, which attract foreign investors and encourage a capital influx, but can also cause high inflation rates, one of the most visible elements of Turkey’s economic crisis. While the foreign investments are useful for Erdogan to tout, it is the high inflation rates which are making living too expensive for many Turkish people. It is President Erdogan’s economic philosophy that high interest rates cause high inflation, and he has fired heads of the Turkish central bank who have refused to continually slash interest rates. This is a heterodox view, and one that so far has failed to solve the growing issue of inflation in the Turkish economy. Whether President Erdogan fully believes in the efficacy of his economic practises or is simply unwilling to give up the possibility of attracting foreign investors with low interest rates remains unclear. Whichever the case may be, it is the Turkish people, mainly the poor and middle class, who are suffering. The characteristic image associated with the current crisis is endless bread lines at kiosks, which sell government subsidised bread at a cheaper price than private bakeries. The municipal government of Istanbul is distributing milk and baby formula to poor mothers, but it cannot fully meet the demand.
President Erdogan is demonstrating the weaknesses of prioritising the concept of economic growth over quality of life and wellbeing. Growth at the expense of people’s living conditions is hollow growth. While economics may be evaluated in terms of metrics, such as share of global foreign investment or inflation rates, it is the human experience(s) attached to these metrics which give them meaning. Inflation, as an abstract concept, has no moral value assigned to it at all. Inflation, when it means that people go hungry because they cannot afford enough bread to feed their families, is evil. As Turkey attempts to resolve this crisis, it will be imperative for leaders to remember that the most pressing issue of the crisis is not how Turkey’s econometrics measure up to other countries on a world leaderboard, but how well Turkey’s economy can provide a dignified standard of living for the people who live there. In the short-term, impressive numbers at the expense of society may improve President Erdogan’s political prospects in the short term and bring back foreign investors, but in the long-run, they will only reproduce the Turkey’s current turmoil.
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