Is Erdogan's party waging a 'holy war' against the free market economy?

Published August 18th, 2014 - 12:26 GMT
over the course of time, the AKP has taken up the path of all the previous populist governments and begun to see the public sector as an easy way to provide employment for people.
over the course of time, the AKP has taken up the path of all the previous populist governments and begun to see the public sector as an easy way to provide employment for people.

Perhaps the most important economic invention of humanity is the free-market economy, which is also the system that is most consistent with human nature. With the very simple rules of the free-market economy, it has been possible to govern giant economies, particularly if what is taking place in the economy is not attributable to an invisible hand and if autonomous regulatory institutions that do not neglect the principles of socialstates and social justice have been well-established. I just the used the word “govern” out of habit because, if you establish the market on solid grounds and principles, you can comfortably leave it to its own devices.

Indeed, the free-market economy, just like the law of gravity, has very simple but determining rules. At the top of this list of rules is the relationship of supply and demand. This relationship plays a determining role in the real sector as well as the finance sector, in the domestic market and international trade. Every step taken that disregards the balance of supply and demand could result in disaster. You can perhaps delay the disaster with manipulative moves or spin doctoring, but you can never prevent it from happening.
If you have chosen the free-market economy as the economic model for your country for this or that reason, you have to act in line with its rules. Thomas Carlyle, who lived in 1880s, expressed the significance of the supply-demand relationship, which hesaw as a law of nature, with his famous saying: “Teach a parrot the terms 'supply and demand' and you've got an economist.”

Certainly, the free-market economy is not the only economic system in the world. Socialist systems with a central economy and a statist approach, mercantilist systems with protectionism and mixed economies -- which plagued Turkey for long years and still does -- are also possible. However, if you veer in the direction of a free-market economy following big economic crises and disasters, you have to abide by its rules. Since late Prime Minister and President Turgut Özal took revolutionary steps to institutionalize thefree-market economy in the 1980s, nobody, apart from some marginal socialist groups, has voiced their objections to this model. Nevertheless, pretending to have adopted thefree-market economy while declaring a battle against its simplest rules must be the most foolish attitude.
The Justice and Development Party (AKP), which began its journey in politics in 2001 by lauding the free-market economy and promising to diminish the state's presence in the economy, mostly remained loyal to its promise in the first years of its power and took steps to curtail public employment and the state's presence in the economy. It accelerated privatization and aimed for effectiveness in the public sector with a lower number of people and more work and production, though for a short period of time. In the same vein, the government encouraged people to retire or part ways with the public sector through other methods. I mean, it did the right thing, and even if it did not reduce the number of public employees significantly, it at least slowed down the rise in the number of public employees for a short period of time.

However, over the course of time, the AKP has taken up the path of all the previous populist governments and begun to see the public sector as an easy way to provide employment for people. While the number of workers has slightly fallen thanks to privatization, the number of public servants has rapidly increased. While the number of public servants was 2.123 million in 2002, this figure has reached 3.184 million today. While 18 percent of the national budget was spent to pay the salaries of public servants in 2002, it has risen to around 30 percent in 2012. The salaries of public servants cost the state TL 22 billion in 2002. It exceeded TL 100 billion in 2012.

As one might recall, immediately after the economic collapse in 2001, then government hastily transferred then-Deputy President of the World Bank Kemal Derviş to Turkey, made him a member of the cabinet and granted him super powers. Derviş exercised those powers very efficiently and restructured the Turkish economy, being mainly the finance sector. In its first years in power, the AKP remained firmly committed to the economic plan made by Derviş and attained important successes due to its loyalty to the plan. However, when it diverted to crony capitalism with political populism and nepotism over time, its magical success story began to be shadowed.

Although Derviş granted the role of a regulatory body to the state and its institutions more than being an economy actor meddling in the market, the AKP has made the state the most important actor of the economy over time. It has made interventions and choices leading to unfair competition even in areas that the private sector -- being made gradually more dependent on the state in areas including healthcare, transportation, mining, energy, finance and education -- can easily overcome.

The government has taken a wide range of dangerous and arbitrary steps that will paralyze the private sector, including an attempt to monopolize information and news in the hands of state-run media outlets against private media; the threat of making public banks enter the participation banking sector, which only has a share of 7 percent in the overall banking sector; and even attempting to make a bank go bankrupt through the hands of the state.

Over the past years in particular, the economy has diverted from the rules of the free-market economy, which heeds fair and equal competition. Certain companies favored by the government have been allowed to grow by being granted public tenders arbitrarily, while other companies not favored by the government have been subjected to attempts to be made bankrupt or to suffer financial losses.

The state's growing hand in the economy has turned into a harsh tool of punishment. In the end, more than 100,000 companies have been profiled, and plans have been exposed to eradicate them from the market.

The AKP government has gradually moved away from the West, which grows and prospers as a free market economy and generates wealth and happiness, and adopted avision which only cares about economic stability. It has taken half-despotic, centralized economies like those of China and Russia as an example and moved away from rational approaches, a sine qua non in an economy, and eventually begun to give irrational reactions to the consequences of market tools. For instance, Economy Minister Nihat Zeybekçi, who does not care for the requirements of the economy but being admired by Prime Minister and President-elect Recep Tayyip Erdoğan, who has become more and more despotic every day, violating the Constitution, law and democratic principles, has finally launched a battle against international rating agencies which present a concrete picture of the economy in a country.
Criticizing Moody's after Fitch, Zeybekçi challenged international rating agencies and said, “As country, we don't care about the assessments you make.” OK, was Moody's saying anything irrational in its analysis? No, its analysis included very rational assessments and warnings. It has warned that although Erdoğan came out the winner of the presidential election, Turkey's vulnerability against the fluctuations in the international markets will continue until the political picture in Turkey clears up following the general elections to be held next year. In addition, it has highlighted that there are question marks about the independence of the Turkish Central Bank.
Moody's has listed a summary of the economic and institutional pressure on Turkey's credit rating as “slowed down growth, high inflation, foreign vulnerabilities and weakening of autonomous and independent institutions, including the central bank,” and voiced its concerns about how the division within the AKP, following the elections and the establishment of the new government in 2015, will reflect on the economic policies and administration. It has listed the risks caused by slowed down growth, a declining savings rate, increasing inflation and the current account deficit in addition to the risks caused by outside factors such as the developments in Ukraine, Syria and Iraq.
The current government, plagued with irrationality and having taken anti-democratic centralized economies as a model for itself, has responded to these assessments by Moody's, which would be valuable for a rational economy administration, with aggressiveness.
May God give some reason to these greedy and incompetent people who are ruining the valuable legacy of Turgut Özal and Kemal Derviş and who are recklessly playing with the nation's future. Amen.

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