Trump cannot be held responsible if a country’s leader cannot find any example to turn to when he talks about ‘domestic and national goods’.
I stated before that, there will be sharp decreases in the value of Turkish Lira (TL) beginning in autumn, and the government will head to the local elections with a quite problematic economy. The recent events in the foreign policy accelerated the process, which seems inevitable. A fall in (currency) value happened beyond the expectations. While the exchange rate of dollar/TL is fluctuating between the wide values of 5.80-7.60, it was an opportunity for speculators.
There is an economical and political basis of this matter. Firstly, the AKP government must come to terms with this fact. The transformation, which has been experienced since 2002 under the AKP rule, created an economic structure, which is dependent on other foreign countries from agriculture to industry, and funded by the short-term foreign capital inflow. This transformation happened among the applause of the media and leaders of the western countries, who are now labelled as imperialist by the AKP government. The fall of base rate interest in the developed capitalist countries encouraged this transformation.
It was a well-known fact by everyone that this unstable economy, funded with the short-term foreign capital inflow, would experience problems once the interest rates in developed capitalist countries increased. Even if the national media turns a blind eye to the reality, identifying Turkey as the most at risk of the “fragile economies” was not without foundation. That the direction of international capital movements was channelled towards developed capitalist economies and that this coincided with the AKP foreign policy hitting a dead end exacerbated the conditions. Frequent tensions with the USA and the other western countries increased instability in relation to the risk premium of Turkish assets and the exchange rate.
We should highlight that the government’s management of the crisis could not have been worse. The government should reflect on how after every speech made by Erdoğan the Turkish Lira was devalued. This has been the case for a long time. Erdoğan addressed his speeches solely with the aim of reassuring his supporters, then another official was left to tidy up the collateral damage. In the past, the likes of Babacan, Başçı or Şimşek undertook this role. After Şimşek, it is notable that this role has not been filled.
Erdoğan’s weekend speech, which threw the market into flux and the rumblings that the foreign currency deposit accounts will be confiscated or they will be paid from the fixed rate as Turkish Liras, is a good example of this. In fact, this rumour has been circulating for a long time. Not only did the government overlook this situation, but it also triggered anxiety by threatening those who do not change their foreign currency. Maybe this was the most important point that we expected to see in Albayrak’s presentation. But he also made no mention of it and confined himself to a presentation, which did not meet expectations. Of course, Erdoğan’s speech in the aftermath created a unique opportunity for speculators.
So, what is waiting for us in the upcoming period? To begin with, it is clear that if the current exchange rate and interest rates are sustained, there will be devastating results for the economy. The problems of the real economy in the credit returns will not only burden the banking system but also distress the European banks. Besides, there will be a prominent rise in the risk premiums in other developing countries. We recently saw the rehearsal of this situation. It is impossible for Turkey, an economy which is interdependent with international economies, to remain as an isolated incident. For this reason, the efforts of other countries, particularly Europe, are not without reason.
Even if the political tension is not completely solved, we can expect it to fall. Even though the government would prefer to explain the situation that Turkey’s economy has been dragged into simply from a political perspective, this is not possible. If Turkey’s economy faces a crisis when there is tension between imperialist countries, the political leadership – the architect of the current accumulation model – has a big role in this result. Trump can be many things. However, Trump cannot be held responsible, if a country’s leader who is in power for 16 years cannot find any example to turn to when he talks about “domestic and national goods”.
Article written by Murat BİRDAL
Translated by: Cansu Güneş İspir