Economic liberty and Turkey

I want to elaborate my view on economic liberty and why it is important in Turkey. I will keep it very short. 

The major advantage of economic liberty, and especially for Turkey, is that it necessitates a limited government. This means that government's reach over economic activity is low. Now, why is this important? Throughout history, government intervention in some way or the other — licensing, exclusive rights (like for Hillary's brother to exploit gold reserves in Haiti), and whatnot — have created a priviliged class of capital owners. A capital owning class per se is not bad and evidence shows that the American capital owning class is very dynamic. Individuals enter and leave with more than half the country having an income at least one fiscal year that has put them into the top-income level class. However, when government's economic intervention is not limited, the political and economic elites will merge (e.g. construction companies and top AKP echelons). Hence, rent-seeking activity will exploit the population and the land.

Turkey's case is ambiguous: the Erdoganist economic and political elite is rent-seeking, yet at the same time they are modernizing the country with elementary necessities. They are building much-needed infrastructure, they have built educational and healthcare institutions. So far, their rent-seeking activities have produced neccesary (public) goods. But, there's this much that can be done in this stage of modernization. While Turkey progresses into a modern economic society, the need for (or the good that can be done by) AKP deminishes, unless they radically transform themselves.

I for one would very much love to see other individuals and parties in Turkey emerging as possible candidates for leading political offices. And by this I don't mean the already existing non-AKP parties. I mean real modern parties from which even European or US political institutions can learn.

The treaty of Lausanne and the 2023 myth

Until recently I tried to ignore most of the myths surrounding the treaty of Lausanne since nothing hurts your health more than a good old Turkish conspiracy theory, and believe me Turkish facebook pages, amateur historians and media outlets are masters when it comes to these issues, as long as this is kept contained to a small group, the societal impacts may be neglected until of course the man who represents your country brings it up, I'm obviously talking about president Erdogan's remark on the treaty:  “July 15 [coup attempt] is the second War of Independence for the Turkish nation. Let us know it like that. They [threatened] us with Sèvres in 1920 and persuaded us to [accept] Lausanne in 1923. Some tried to deceive us by presenting Lausanne as victory. In Lausanne, we gave away the [now-Greek] islands that you could shout across to,” he said.

For those who are new to Turkish politics and history, the Ottoman Empire was carved up into several pieces with the treaty of Sèvres which led to a revolt of several of it's officers led by Mustafa Kemal Atatürk who fought against the Ottoman government and the Allied forces for a 'better' treaty that would return some of the land (yet not everything) to the newly founded Turkish republic.

However, since a couple of years there have been circulating conspiracy theories around the internet in which Islamists claim that the treaty was actually "a defeat" and then come up with maps depicting the Ottoman Empire in 1914 as if it was taken during it's golden age, or say things that Turkey couldn't dig their own resources (notable 'boron') until 2023 (a date often referring by Erdogan as the time when "everything will change") despite that there is literally no proof of this in the whole treaty and the fact that Turkish state companies are actually already using boron or the classical: Turkey couldn't start manufacturing their own domestic car brand because of that treaty.

Now the reason why they attack that treaty which was signed by İsmet İnönü is pretty simple, first of al it's to blame Turkey's shortcomings on historical or foreign causes, why doesn't Turkey have it's domestic car brand yet ? "Well because of that old treaty forbids us." Instead of laying the blame on our cultural and political problems.

The second reason is because there is a sizable portion of Turkey's conservative population with disdain towards Atatürk that could be divided in to 2 groups: Those who hate him but don't attack him due to his military achievements and those who do and that's why the treaty is attacked, because they know that a lot of people don't attack Atatürk due to his victorious military achievements, by changing those to "not real victories" or "treaties that only have handicapped Turkey" in order to wipe away Atatürk's legacy and opening the opportunity to attack him on other issues like his secular reforms.

So our Greek friends can sleep well tonight too, knowing that the attacks on the Lausanne treaty could be seen as more of indirect attacks on Atatürk rather than hints to territorial expansion into the Greek Islands.

Turkic peoples around Eurasia

This map is showing the areas and regions populated by Turkic peoples. As you can see, they form a "crescent" from north-eastern Siberia to Central Eurasia and Turkey to Finland.

One would think that his increases the chances of forming a Turkic union. However, in a conversation with the Kazakh ambassador to the Netherlands, I was told that the chances for such a union are very slim if not nonexistent. The Kazakh ambassador's main argument touched the major differences between the Turkic states' (political-)economies. When assessing the economy, he stated that Kazakhstan's economy is oil-based and one that industrializes, whereas Kyrgyzstan is an agriculture-based economy.

I agree with the ambassador and see no possibilities to establish such a substantial Turkic union. But, the existing (language) union and the common linguistic and even historic commonalities are stepping stones towards more cooperation.

The Turkish lira and US$

The appreciation of the US$ in the recent months have been one of the most drastic ones in the history of Turkey. Since the economic downturn caused by printing money during the Menderes administration, Turkey has had chronic problems with appreciating foreign (Western) currency. During the 1990s, the Turkish lira was several years the least-valued currency. However, the recent appreciation of the US$ (or depreciation of the Turkish lira) could have some significant implications in the short term as well as the long term.

Theoretically, it can boost exports and increase incentives to replace import by the domestic industry. Perhaps Turkey's economy will get incentivized to produce and innovate local products and services. This development could provide Turkey with stronger economic foundations in the medium and long term upon which Turkey can escape the so-called medium-income trap. This trap is a result of a failure to advance the economy into more complex products. These complex products could be automobiles, IT, pharmaceuticals, and the like.

However, in Turkey's case, there's enough reason to believe that capital flight drives the appreciation of the US$. Investors take out capital and in doing so exchange Turkish liras for US dollars. The demand for US$ goes up as well as the supply of TL. This surge in the US$ value is partially explainable because of Turkish politics, specifically the government who scares off investors by some statements. But, political changes in the natural market of the US$, the US, is also an explanatory variable in the capital outflow in Turkey. Donald Trump has stated that he'd rebuild the crumbling American infrastructure among other things. Already, financial markets are rethinking their portfolio structures to get ready to provide the necessary funds for Trump's economic plans. Also, the central bank of the United States, the Federal Reserve System, has signaled that it would increase its interests rates. With Turkey's central bank being pressured to lower interests rates to free up capital for Turkey's domestic economic expansion, (institutional) investors are betting on the US, which does not contain to the Turkish economy, but emerging market states elsewhere.

There are also other explanatory variables in the case of the depreciating Turkish lira. In less dynamic situations, the Turkish lira would also depreciate due to the structural trade deficit of Turkey. Next to having no strong complex-products industries, Turkey also lacks critical energy resources within its borders. While Turkey is rapidly building an energy sector that not only would provide domestic consumers with an energy mix that also consists of substantive parts of renewables, Turkey is trying to become the energy corridor for Europe, which would increase Turkey's standing within the geostrategic dimension and possibly could boost Turkey's economy as an energy innovator while decreasing the costs of energy imports. Thus, this energy sector would not only mean that Turkey could reduce the costs of its imports and thereby decrease its trade deficit, but Turkey could also become a center for energy innovation, which could spill over to other industries as well. 

Unfortunately, with the recent securitization of non-security issues by the AKP, Turkey has a hard time in realizing the possibilities mentioned above. Moreover, this post only touches upon several issues of the Turkish economy, while the total amount of issues and problems are paramount. Furthermore, while a future without AKP is impossible in the coming terms of parliament and president, the opposition parties within Turkey also lack substantive alternatives while they keep increasing to base their legitimacy upon the countering the AKP.