Turkey’s Political and Economic Future under Erdogan

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Turkey’s Political and Economic Future under Erdogan
Marcus Templar
U.S. Army Cryptologic Linguist, and All-Source Intelligence Analyst of the Defense Intelligence Agency (Retd.)
30 July, 2018

The Hellenic Cultural Commission sponsored a panel discussion on July 25th in Atlantic City, New Jersey. The panel discussion transpired during the Convention of the Family Supreme of the American headquarters for the American-Hellenic Educational Progress Association, or AHEPA. The moderator of the panel was Mr. Lou Katsos and the participants in the discussion were professor Alexander Kitroeff, former ambassador Karolos Gadis, and I. The subject of the discussion was “Turkish Irredentism and the Finlandization of the Eastern Mediterranean”. As it is known, finlandization is the process or result of being obliged to favor for economic reasons, or at least not to oppose the interests of the great power, as in the case of Finland, the interests of the former Soviet Union despite not being politically allied to it.

The panellists suggested and discussed several points of view from historical, political, diplomatic, and psychological aspects of Turkey and its present leadership, especially of President Recep Tayyip Erdogan. Some of the opinions expressed below were also communicated during a radio program and individual conversations. The core of the discussion was Erdogan and the new Turkey as he has envisioned it. And to implement his vision even before he took an oath as president he issued a published 143 page dictum changing the operation of every single ministry and other agencies under the ministries.

After that Erdogan continued issuing decree after decree making the Republic of Turkey a fully functional dictatorship that Ataturk would be jealous and the Sultan disgusted. Controlling all political life, Erdogan could essentially become president for life whose psychopathic cruelty would make Francois Duvalier of Haiti, and also known as Papa Doc, a cub scout. The man fundamentally caused unchecked, wicked authority as Russia’s Vladimir Putin and Hungary’s Viktor Orban. They all use democracy to expand their influence in the same manner that the Communists had done in the past.

But Erdogan’s vision for Turkey is magnificently ambitions and costly. Because the Straits are getting shallower and narrower, Erdogan is determined to open a canal from the Black Sea to the Sea of Marmara near Küçükçekmece, 25 kilometres west of Istanbul. The name of the canal is Kanal İstanbul and Erdogan is determined to make the canal the rival of Suez and Panama. He has brushed around aside legal, environmental and budgetary questions to make the canal a central plank of his re-election bid in June 24th.

But the Financial Times stated that according to Erdogan one of his first projects in the new era will be to start building Kanal İstanbul. There might be a Suez somewhere, a Panama somewhere else, but the Kanal İstanbul will send the world a message. The problem is that when Erdogan announced the canal in 2011, the estimated cost was 13 billion US dollars. Today it has increased to 15 billion US dollars and by the time the project ends its price could reach 20 billion US dollars. That’s very expensive.

Also, Erdogan wants to build at least one runway long enough to take care of the taxiing needs of F-35 aircraft. However, it always depends on specific variants as whether Turkey will be trusted to own such an aircraft, the capacity for such a heavy and costly aircraft to manoeuvre, like turn, climb, run, the specific models of the aircraft like traditional takeoff, landing, versus vertical takeoff, landing, guns, and a few other variants. With a price tag of 94,6 million US dollars each, for only the basic F-35A; the price for a more advanced model of F-35 could include and increase its cost to 132,44 million US dollars.

If we add the grand plan for the Istanbul Airport that Erdogan has in mind we can quickly add the cost of 12 billion US dollars as he wants to improve the airport by adding six runways across a strip-like land. It will take about a decade to complete with a projection of making the busiest airport not just in the region but also on the planet. The projected number of passages could hit 200 million people annually.

However, in a global economy which is afflicted gradually by worries from an unfolding trade war to higher oil prices, Turkey could be very close to comfort. Turkish economy is 22nd in the world, below that of the state of Illinois of the United States, which is 20th, and below Russia, which is 13th in the world.

Starting a business is not an easy venture, but including family in the government is unwise. Yet in a country whose finances constitute a bubble ready to burst, the worst thing anyone wants to do is having a relative as finance minister. Berat Albayrak is a Turkish businessman and politician, but also Erdogan’s son-in-law. The question is whether Erdogan will listen to his relative or he will tell his son-in-law to implement his personal policies. As a Bloomberg business week out it, it is abundantly clear that the president’s whim will appraise the all future strategic decisions taken about anything in Turkey and the new cabinet will function purely as the rubber-stamping forum.

The only constraints set to be imposed on Erdogan are those likely to derive from bond and currency markets which may inhibit any overtly reckless economic polls-making. The chances in the function of the government are expected to have a severe impact on Turkish assets and it is assumed that Turkish assets to remain under pressure, unless policy measures address the country’s high inflation and external dependence, it won’t make it.

The Central Bank has not raised rates enough like some other countries given the government’s focus as GDP growth rather than inflation or currency stability. On the other hand, Turkey is likely to face more challenges ahead and it is running a massive fiscal deficit but don’t have savings to fund it.

So, Erdogan atop of it was the only one who actually decided Turkish monetary policy keeping the Central Bank of the Republic of Turkey captive. He has prevented any recent Central Bank constraints and in the last two years under Erdogan’s control, because he helped the Turkish voters to do better by offering cash bonus and other trading methods.

Turkey has had an extraordinary loose both monetary and fiscal policies. Turkey is facing the variety of issues. The Turkish lira has declined, the inflation rate is in the area of 12%, although the target was 5%, and also Erdogan’s restriction of the Central Bank’s independence. Setting interest rates which opt in for a monetary policy that prioritizes growth over controlling the inflation, is a real problem. Nevertheless, the voters preferred the man, who as a mayor of Istanbul had cleaned this  city, even if their first choice was a bit shaky – and that is an understatement.

Democracy in Turkey suffered since its inception, oscillating from the socialism of Ataturk to the right-wing Islamists of Erdogan, and that includes about 1.5 million people who live abroad, most of them in Germany. The burst of the economic bubble and the consequent implosion of the present political survival of Turkey is not a matter of supposition but a matter of time.

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