Erdoğan under pressure

By its eighteenth year of rule, the Justice and Development Party has strayed far from securing the prosperity it promised. Joachim Becker, professor at the University of Economics in Vienna, analyses the current political and economic situation in Turkey.

The popularity of Recep Tayyip Erdoğan’s right-wing Justice and Development Party (Adalet ve Kalkınma Partisi – AKP) is in decline. For the next presidential election, Erdoğan faces serious potential contenders, in particular Ekrem İmamoğlu of the oppositional centrist Republican People’s Party (Cumhuriyet Halk Parti – CHP), who was elected as the mayor of Istanbul in 2019. Erdoğan is fully aware that the holding the office of the mayor of this big metropolis might be a good springboard for getting into the highest positions of the Republic. Erdoğan had been himself mayor of Istanbul before becoming Prime Minister in 2003. 

AKP did very badly in the big cities in the 2019 municipal elections. According to opinion polls, it enjoys relatively low support among young voters. One of the factors behind, the electoral decline of AKP is the difficult socio-economic situation experienced by large segments of the population. For them “kalkınma” – development – promised by AKP already in its party name proves to be a mirage. 

Corruption scandals have tarnished the image of AKP. Recently, the Trade Minister, Ruhsar Pekcan had to resign after it had become known that members of her family amassed wealth to the detriment of the state. In a You Tube messages, the right-wing Mafioso Sedat Peker, who had been close to the ruling party and had publicly threatened opposition activists with a bloodbath, talked extensively on links between high official and criminal structures. Reportedly, even half of AKP voters believe these revelations rather than the government’s denials.

Economic and social consequences of the Covid-19 crisis

The Covid-19 pandemic has exacerbated already pre-existing problems like underemployment and significant household debts. The government has reacted to Covid-19 by a series of lockdowns. It designed the lockdowns in a way that should affect business as little as possible. The working populations could move more freely than the young and the elderly who faced temporarily very harsh forms of confinement. In spring this year, tourists could temporarily move freely whereas Turkish citizens were subject to strict confinement rules. This regulation caused some annoyance in the population. 

In spite of the lockdowns, Turkey suffered from spikes of infections. During these spikes, mortality grew significantly. The vaccination campaign is highly centralized, and seems to be rather well organized. In mid-July, about 45% of the population had received at least the first vaccine. This is not very different from many Southeast and Central East European countries, though the share of fully vaccinated persons is significantly lower in Turkey.

Unemployment and underemployment are structurally high in Turkey. Many workers are very precariously employed. In 2003, the new labour code eased the firing of workers. During the pandemic, the Turkish government temporarily banned dismissals. This measure provided mainly some protection for workers in the formal sector. The official employment rate did not significantly increase. 

In May 2021, official unemployment stood at 13.2%. Youth unemployment was significantly higher and reached 24.0%. Other employment indicators show a grimmer picture. The employment rate significantly decreased in early 2020. 

The broad unemployment rate, as it is calculated by the trade union federation research institute DİSK-AR, shows a strong increase after the beginning of the Covid-19 crisis. This figure that takes into account the strong share of informal employment and of underemployment is still significantly higher than in 2019. In May 2021, this figure reached 27.2%. For women, it reached even 33.7%. Even for those who have a job, it is often very difficult to make ends meet. The was a sharp increase of prices of basic commodities, food in particular. In June 2021, the official inflation rate stood at 17.53% and there have been controversies on the reliability of the official inflation rates.

Economic anti-crisis policies have focused on credit provision, not on fiscal measures. According to Fiscal Monitor Database of the International Monetary Fund (IMF), the fiscal measures adopted up to March 2021 amounted to 2.6% of the GDP. Just 0.6% of GDP was allocated to reduced working hours. The main focus was rather on big companies. The main form was liquidity provision. Households went heavily into debt during the pandemic. As the independent Turkish news portal Bianet reported, the number of individual loan borrowers increased form 7 million in March 2020 to 34 million in March 2021. Thus, government policies massively deepened financialisation – and increased the vulnerability to financial crisis.

Financial instability

Since their beginnings, AKP governments have pushed growth through credit provisions. This type of financialisation has relied on foreign capital inflows. Up to 2013, the indebtedness of households increased very rapidly. From a very low level of 3.0% of GDP in 2003, household debts increased to 23.8% of GDP in 2013. 

Households used the credits partially for buying flats, partially for paying consumption goods. The real estate credits gave a boost to construction, which has been a crucial pillar of the AKP economic model. Housing construction, infrastructure projects and public tenders have been key instruments for building up a new fraction of big capital groups close to the ruling party. Consumer credits sustained demand for the inward-looking Turkish industries. Low-income earners have taken a very substantial part of the consumer credits. 

Already during this period, non-financial corporations increased their indebtedness as well. Corporate loans have played an increasingly important role since 2013. The AKP government has pushed credits for small- and medium-sized firms. Part of the corporate debt is denominated in foreign exchange. Any significant devaluation of the Turkish lira (TL) spells trouble for the foreign exchange debts. The foreign exchange credit problem is confined to the corporate sector. In the wake of the 2008/2009 financial crisis, foreign exchange credits to households were banned.

Since 2013, this model of dependent financialisation has faced permanent crisis, which in turn provoked some heterodox economic policy responses. The trouble started when the US Federal Reserve increased its interest rates in 2013 – with consequences for externally indebted countries like Turkey. Contrary to this upward push of the interest rate, the AKP government was increasingly trying to lower interest rates in order to sustain the growth rate. Lower interest Turkish interest rates led to several rounds of capital flight and strong depreciation of the Turkish lira. 

Since 2018, Turkey has suffered from a chain of exchange rate crises. The depreciations have put the firms with foreign debt under enormous pressure. The interest rate and exchange rate policies have become highly contested in Turkey. This has resulted in numerous changes at the top position of the Central Bank. The AKP government is facing a dilemma between low interest rates and strong currency depreciation plus soaring inflation. 

High interest rates cause problems to small business, which belong to the core of the AKP basis. Currency depreciation hits the big conglomerates and, through higher inflation, the popular classes. Any policy option hits part of the AKP electoral basis. The economic space for manoeuvre is getting smaller. Although the government has recognized the high import dependence of manufacturing as a crucial problem and has taken some counter-measures, it has not been able to resolve this structural weakness. The dependence on goods and capital imports is the Achilles heel of the AKP economic strategy.

Photo: foto : Milovan Milenković / Kamerades

Towards a permanent exceptional state

Economic growth and some social policies benefiting especially precarious sectors of the popular classes enabled AKP to increase its electorate until 2015. During this time, AKP was able gain control over the state apparatus and to strategically weaken the Kemalist bureaucracies. 

The Gülen community – a type of Islamic Opus Dei – had already entrenched its cadres in the state apparatuses when AKP assumed the government and played a key role in establishing AKP control over the state. 

With the Gezi protests in 2013, the AKP government faced a challenge from the left – and reacted with repression. For the Kurdish forces, it was not easy to take a position on the Gezi protests. On the one hand, they were politically close to them. On the other hand, there were attempts to find a political solution to the “Kurdish question” with the AKP government. When AKP realized that the Kurdish forces were not willing to support its project of an ultra-strong presidency and The Peoples’ Democratic Party (Halkların Demokratik Partisi – HDP) was consolidating itself as an electoral force, AKP ended the exploratory talks over a political solution and took an increasingly repressive line against HDP. Many HDP activists have been detained, most of its elected mayors have been deposed. In June 2021, the Constitutional Court opened proceedings for banning HDP.

AKP also faced a challenge from within. The core cadre of AKP and the Gülenists entered into an open power struggle in 2013. This struggle culminated in an attempted coup on 15 July 2016. The government declared State of Emergency. 

In 2018, the “Authorization Law” gave sweeping powers to the president of the Republic, enacting a form of a “permanent exceptional state” as as the Turkish social scientists Özlem Kaygusuz and Oya Aydın call it. The emergency powers were used to purge the state apparatus – not only of Gülenists, but also of other officials suspected of possible disloyalty to AKP. 

1.1 million criminal investigations were opened on charges of supporting terrorist organisations. The state dismissed 130,000 officials. The judiciary was particularly hard hit by the purges. 5,000 of 12,000 judges and public prosecutors were dismissed and replaced by young party loyalists. The judiciary is under enormous pressure. The assets of many businesses, which were regarded as being close to the Gülen community, were seized by the state. Businessmen close to AKP have taken over most of private media. The few remaining independent media are subject to tight restrictions. There have been numerous trials of journalists.

A result of the rift in the religious right has been that AKP entered into an alliance with the ultra-nationalist forces. At the party level, this has translated into a strategic alliance with the Nationalist Movement Party (Milliyetçi Hareket Partisi – MHP). In 2017, the two parties managed to win a referendum on establishing an extremely highly centralized presidency – an ambition nourished for a long time by AKP.

With the forming of the AKP-MHP alliance, the stance against the Kurdish movements and their demands became even stiffer. In addition, the government has taken an ever more conservative position on gender issues. The recent Turkish withdrawal from the Istanbul convention is a highly symbolic indication of this. AKP seems to focus more and more on its nationalist-religious core electorate.

Trade unions, ecologist, feminist groups, students and academic activists are mostly engaged in defensive struggles against the hardened AKP rule.

Eroding AKP bloc and heterogeneous opposition forces

The political opposition is highly heterogeneous. The centrist CHP is the largest opposition force. In opinion polls, its preferences stagnate at around 25%. However, the most promising potential presidential candidate, the mayor of Istanbul, Ekrem İmamoğlu, comes from the ranks of this party. 

HDP which is threatened by an official ban is the most left-wing of the parliamentary parties. It has taken up social issues systematically. It advocates a political and peaceful solution to the so-called “Kurdish question”. 

The nationalist-laicist Good Party (İyi Parti) credited with about 10% of the vote is at the other end of the opposition’s political spectrum. During the last municipal elections, the heterogeneous opposition found tactical ways to enhance the chance of opposition candidates. In the national elections, this will be more difficult.

The party system is complemented by two new formations that split from AKP. Ahmet Davutoğlu, a former Prime Minister (2009-2016), formed the rather conservative Future Party (Gelecek Partisi – GP). The state apparatus has already taken first repressive steps against the GP. The second split from AKP, the Democracy and Progress Party (Demokrasi ve Atılım Partisi – DEVA), is rather liberal-inclined. It is headed by Ali Babacan, who had been Minister for Economic Affairs and briefly Foreign Minister between the beginning of the AKP rule and 2015. He is favouring a rather orthodox economic policy.

Faced with the erosion of its electoral base, AKP will do its best to enhance the splits within the opposition. The party tries to compensate its internal weakening by an activist foreign policy.

The flight forward: Making Turkey a regional power

In its initial consolidation phase, the AKP government sought close relations with the IMF, the US government and the EU. At that time, governments in the EU and the US wanted to make the AKP government a showcase for “moderate Islam”. The EU started to seriously negotiate an official “candidate status” with Turkey. These negotiations helped the AKP to curb the institutional power of Kemalist state apparatuses. 

Key EU member states were not enthusiastic that Turkey got the official status of a candidate country after having been in the waiting room for more than 40 years. Soon after the official commencement of the accession negotiations, the negotiations got bogged down. The AKP government had to take notice that the EU was not too serious about the accession negotiations. During the honeymoon with the EU, the AKP government facilitated a compromise solution of the reunification of Cyprus, which has been divided since a failed military coup of Greek nationalist forces in 1974 and the subsequent Turkish military intervention. The Greek Cypriots rejected the compromise in a referendum in the mistaken belief to get a better deal in the future.

In the early 2010s, the AKP has adopted an increasingly autonomous foreign policy line vis-à-vis the USA and the EU and has initiatives towards making Turkey a regional power. The mass protests in Arab countries provided AKP with new regional policy options. It put its weight behind forces close to the Muslim Brotherhood. 

In key cases, like Egypt, the political success of those regional allies was short-lived. Initially, the AKP government hesitated to get involved into the military conflicts that emerged in the wake of protests in Syria and Libya. In the Syrian case, it finally intervened massively. However, the conflicts in Syria had consequences that had not been anticipated by the AKP government. With Russian and Iranian support, the Assad regime proved to be much more resilient than AKP had expected. 

Syrian left-wing Kurdish forces with historical links to the Turkish-Kurdish politico-military Kurdistan Workers’ Party (Partîya Karkerên Kurdistanê – PKK) were able to establish autonomous zones in Northern Syria. They proved to be resilient in the face of the so-called Islamic State, and were for a certain period perceived as a key military ally against the forces of the Islamic State by Western governments. For domestic political reasons, this was a very unwelcome development for AKP. A strip in the North of Syria has been occupied by Turkish forces in order to create a buffer zone to the Kurdish autonomous zones in Syria. There are also Turkish military operations in the North of Iraq. The Turkish allies in Syria – right-wing Islamic forces – have been pushed back to the Syrian province of Idlib. Here, a precarious ceasefire – with Russian and Turkish backing – has been established. In Libya, Turkish and Russian forces likewise back different political-military factions – and find at least temporary compromises. The relationship with Russia is characterized by regional competition, limited conflict and cooperation.

From Syria, millions fled to Turkey. The presence of 3.6 million Syrian refugees is a significant economic burden for the AKP government. Reactions in the Turkish population towards the refugees have become increasingly hostile. The AKP government has tried to take external political advantage of the refugees. It has used the issue of Syrian and other refugees that left Turkey in large numbers for more prosperous EU countries in 2015 to put the EU under pressure. 

In March 2016, the EU and Turkey signed a deal on the refugees. It envisaged the return of some of the refugees from Greece to Turkey and stricter Turkish controls in exchange for the disbursement of 3 billion euros from the EU. This agreement has not been implemented to the letter, but AKP government has restrained further migration to the EU. 

In return, the EU has taken a conciliatory stance towards the AKP government. It confines it criticism of the authoritarian practices of the AKP government to critical remarks in the progress reports on Turkish EU accession and occasional declarations of concern about human right violations. With its key role in Libya, the Turkish government has now also indirect influence on the second flight and migration route to the EU. There are also open rifts on gas exploration around Cyprus with the EU.

In light of AKP’s shrinking economic and political space for manoeuvre, an exacerbation of the strategy of permanently fostering domestic and external tensions can be expected. 

This text was first published in Serbian on Aug 17, 2021.

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