One-man rule a road to ruin for Turkey’s economy

Since his inauguration as Turkey’s first executive president last week, Recep Tayyip Erdoğan has wasted no time in issuing a string of decrees reshaping the country’s economic institutions and structures.

Some institutions have been abolished, others have seen their structures and procedures reshaped entirely. This was an effort to completely centralise Turkey’s economic model and strip away its last vestiges of institutional independence, placing the reins squarely in Erdoğan’s hands. Newly established boards, commissions and councils tied directly to the presidency are set to create policy and strategy in the economy and every other field.

Two of the institutions established by decree, the Coordination Board for Economic Affairs in the State of Emergency and a commission to review frozen assets have raised eyebrows and serious questions about the country’s direction.

With stubbornly high inflation and a weakening currency already hurting the Turkish economy, the establishment of these institutions has further deepened the gloom. When credit agency Fitch downgraded Turkey’s credit rating last week, not long after Moody’s did the same, it added to the sense of foreboding.

For main opposition Republican People’s Party deputy Selin Sayek Böke, a veteran of the World Bank and IMF with a PhD in economics, it is precisely the one-man system that has brought Turkey to the point where institutional collapse is inevitable.

“There’s a single person who will make the decisions, who will give orders and expect them to be carried out, and that is Erdoğan,” Böke told Ahval. “Since now every institution, every state employee is bound to Erdoğan, these boards, offices and commissions no longer mean anything, they’re just for show.”

For Böke, the newly established Coordination Board for Economic Affairs in the State of Emergency aptly illustrates this new reality. The ongoing state of emergency, which gives the government and security forces sweeping powers, has been in place since the aftermath of the 2016 failed coup attempt, but ministers say it will soon be rescinded.

“Even the name aims to confuse. On the one hand, economic affairs, on the other the state of emergency, and then there’s the idea of coordination. (Erdoğan) has been able to do whatever he likes through executive decree under the state of emergency, if they need a separate body to effect a state of emergency in the economy, that is emblematic of the economy’s collapse … and the extraordinary rules being prepared to administer it,” said Böke.

Yet even this extraordinary board will not have the authority to make decisions independently, Böke said. “In the previous model, there were institutions the president could not impose himself on or interfere with to a great degree. From now on, he will decide on everything,” she said.

Turkey’s new treasury and finance minister, Erdoğan’s son-in-law Berat Albayrak, has made moves to ease investor fears around Turkey’s economic imbalances, pledging to tackle the country’s dangerously high inflation levels and guarantee the central bank’s independence, but Böke is far from convinced.

One need look no further than Erdoğan’s last international foray to discuss his economic plans to see what is in store for Albayrak and his plans to “rebalance” the economy, according to the CHP deputy. The president’s trip to London in May and his alarming statements to Bloomberg TV resulted in a record-breaking plunge in the lira’s value and left the central bank no choice but to raise interest rates.

Albayrak’s planned trip to London this week is likely to have the same result, said Böke – even higher interest rates and inflation and an even weaker lira. Moreover, the minister himself does not believe his statements promising to make the central bank more independent, “and in fact we can be sure (it) and all other autonomous and independent economic bodies will become bound more tightly than ever before to the political structure and will of one person”.

The latest decrees regarding the central bank are proof, said Böke. The bank’s governor has seen his term reduced from five to four years, he no longer has the authority to choose his own deputies or even provide recommendations. Rather, the governor, deputies and monetary policy board members are all to be appointed by the president.

For Böke, Erdoğan’s recent appointments to the country’s top political positions leave little room for optimism about what that means. Besides his son-in-law and a range of loyalists, the president’s new cabinet consists largely of business figures, a recipe for conflicts of interests.

“These appointments reveal the president’s perception of the state, his expectations from it and what he sees it as. The people have been excluded from the state. It now belongs to one man, his family and close allies, and those companions he has gathered from the private sector,” she said.

Selin Sayek Böke
This subversion of the state and its institutions has created a vicious circle that means regaining investor confidence in Turkey, a precondition for reviving the economy, will be a challenge that Böke said was insurmountable for the current government.

The simultaneous rise of interest rates and weakening of the currency point to lack of confidence as the economy’s fundamental problem, said Böke, adding that it is precisely Erdoğan’s one-man control over the economy that has driven confidence down.

Under the current system of government, no investor would trust Albayrak’s statements on the central bank, nor will Turkey be able to find the foreign capital it desperately needs except at exorbitant rates, she said.

Furthermore, the country’s lack of investment in manufacturing has left it reliant on imports and saddled with a current account deficit more than $56 billion, with imported goods bound to become more expensive due to the weakening lira.

“The president has two options here, either cut imports, consumption and demand, slowing down the economy to do so, and accept any conditions to secure foreign funding, perhaps making a new agreement with the International Monetary Fund, and forcing the people to bear the brunt,” Böke said.

The second option, she said, was to make a determined effort to raise production through investment in a technologically advanced and efficient manufacturing sector and cut Turkey’s dependence on imports.

“But to do this means raising the quality and education level of the country’s human resources. That requires investment in education, technology, science and research, and the cultivation of a free-thinking, open-minded workforce,” said Böke.

For Böke, the chances of such a move by the current government, which has ramped up a crackdown on intellectuals and free thinkers as it tightens its grip on the country’s education system, are all too slim.