A Letter from Turkey: Hard Times in Asia Minor
Letter from Turkey: On the Hard Landing Strip
Turkey’s Black Friday would be a good way to describe 10 August when the value of the Turkish lira plummeted by at least 14 percent in a single day to 6.428 TL to the US dollar. Since the beginning of 2018, the lira has shed 41 percent of its value, particularly since the beginning of May. Everyone here is in shock.
Direct foreign investment, upon which the Turkish economy depends, is heading for the doors in this unstable environment. Friends who have loans in US dollars are looking at having to pay out a lot more of their Turkish lira earnings to pay off their debts. The price of agricultural products, with inputs like oil and fertilizer priced in dollars, had already seen steep hikes in our Friday market. A local restaurateur told us that Friday evening reservations suffered a sharp drop as people thought twice about eating out.
The local housing market, already stagnant except for purchases by wealthy Middle East investors, will no doubt go into the deep freeze as no one will want to purchase a home in conditions of such price instability. In short, anyone who gets paid in Turkish lira, which is the vast majority, will see a hike in their cost of living. In this environment, there is a justified fear of a wave of bankruptcies of companies unable to pay their dollar or euro-based loans and the resultant increase in unemployment, already in double digits. And perhaps worst of all is the uncertainty of not knowing how and when this crisis will end.
In fact, the economic problems of less developed countries, including Turkey, have been growing ever since the US moved away from its loose money policy to its current tight money policy with its rising interest rates. Investors then began to move their money from more risky but more profitable (for them) economies back to the US. But today Turkey in particular seems to be in the centre of a perfect storm of developments, which has everyone here depressed, pessimistic and on edge. How did the lira crash, seemingly overnight?
Is it the Pastor Brunson affair that lit the match? Or perhaps the guilty verdict of Halkbank Deputy CEO Mehmet Hakan Attilla for allegedly violating US sanctions against Iran? Or Turkey’s expanding relations with Russia, Iran and China?
American Pastor Andrew Brunson has been in prison for almost two years, under the now formulaic charge of aiding terrorist organizations, namely the Fethullah Gülen movement as well as the PKK, two diametrically opposed political forces, but without being convicted of anything. He is in the same boat as thousands of prisoners in Turkey today similarly charged (or not, in some cases) and rotting in prison with no resolution to their cases, a result of a massive purge following the 2016 failed coup attempt blamed on the Gülen movement. By any standard, basic justice calls for their immediate release, all of them. However, the US administration’s focus on the Brunson case to the exclusion of others makes it seem like a Christian crusade to bully Muslim Turkey, an image that plays well with our president’s base and gets a sympathetic ear generally in Turkish society. But the Brunson affair could not possibly be the only factor behind the deteriorating state of US/Turkish relations and the lira’s crash.
Turkish State-owned Halkbank deputy CEO Mehmet Hakan Atilla was tried in New York and given a 32-month sentence for violating US sanctions against Iran and raising the possibility of a fine of billions of dollars against Halkbank itself for the same ‘offense’. One might ask oneself, what right does the US have to control any other sovereign country’s dealings with another? Turkey has already announced that it will not comply with a recent additional demand to not do business with Iran or face America’s wrath, another stance that strikes a positive chord generally among Turkish citizens.
A lot has been written in the international media pointing to Turkey’s expanding relations with Russia, Iran and China with the suggestion that Turkey was moving out of the orbit of NATO and, in addition, out of the current capitalist, i.e., neo-liberal economic mainstream. But Turkey has been one of the biggest boosters of the neo-liberal model in terms of privatizing public assets and services, mostly to ruling party cronies. But while global neo-liberal ‘reforms’ have resulted in a massive transfer of wealth from the working class to parasitic ruling elites, in Turkey, the ruling AK Party has also felt compelled to implement populist programs to keep itself in power, for example, a virtually free national public health care system, badly needed public transportation projects and improved housing for poor and working people, all of which has ballooned Turkey’s budget deficit, requiring massive infusions of foreign capital and thus tying it inextricably to the dollar and euro.
At bottom, it would seem that the Trump administration’s attempt to use trade warfare, with its weapons of tariffs and sanctions, to reverse the waning power of US capital in the world has caught its NATO ally Turkey in a situation of collateral damage. No defender of national sovereignty it seems, no matter how autocratic and loyal to the US-dominated capitalist system, can be permitted to get in the way of making America great again.
There is speculation that Turkey will have to turn to the IMF for help out of its debt crisis. If so, that could be a poison pill that will undermine the kinds of public services that are depended upon by poor Turks. Everyone here is afraid of what Monday morning will bring. And the days and weeks after. As of now, the response of the president in the face of this growing crisis has been ‘They may have their dollar, but we have our people and Allah.’ Oh dear.