Authoritarianism and economic liberalism: a poisonous cocktail

President Erdoğan came to power in 1994 as the mayor of Istanbul and since then his one and only motivation has always been Islamism. The loan-friendly capital transactions and the resulting problems paved the way for broad support for Islamism. In the meantime, the pro-market and anti-market forces have united to become the fuel of Erdoğan’s myth as the “savior.”

Ten days before the foundation of the Justice and Development Party (AKP) Rahmi Koç, the president of Koç Holding, attended a debate programmed that was hosted by Taha Akyol on CNN Türk in August 2001. “Recep Tayyip Erdoğan has a lot of money. No idea how he accumulated it but he has saved up to 1 billion dollars” Koç said during that programme. The businessman discussed Erdoğan’s financial activities, his time in jail and his stint as the mayor of Istanbul. “He did his homework and says he has renewed himself. I don’t believe it. He’s planning to reach his target by choosing a different path than that of his former leader Erbakan. Perhaps a softer path” stated Koç.

Five days after the AKP came to power, Rahmi Koç posted an internal memo in Koç Holding in November 2002. In his message, he referred to “the difficulties of 2001” and wrote, “He [Erdoğan] has cleaned the ship’s deck. Those who made viable businesses got stronger but those who grew too fast because of political influences and favors, got wiped out.”
Earthquakes, political murders and massacres, economic crises and embezzlements had marked the preceding 10 years in Turkey. A new dream now lay before the country. Rahmi Koç probably saw the transformation in 2002 far better than anyone else. “Clearing the deck” did not only refer to the liquidation of the “sycophantic” relationships of the 1990s, it implied the adoption of a new economic regime, which even the former military coups were unable to bring about.

The Saving Deposit Insurance Fund (TMSF) conducted an operation in the financial system with the objective of reorganizing the capital structure by using the holding company banking system. The transformation of private ownership was completed by privatizations and sharing public ownership. But the main step was to redefine the role of the state.
The administration was restructured to prevent the public sector from interfering with the economy by its using its own regulatory boards and thus the economy was freed from the public sector’s “tutelage.” The state was not downsizing, on the contrary, a strong and functional state apparatus was being built to strengthen capital accumulation.

After 2002, the labor law was made more flexible. Subcontracting was also integrated into the public sector, which in turn exhausted job security in all fields. As monetary policies pressured wages, privatizations enabled the elimination of workers’ unions. The first pillar of the “New Turkey” was an authoritarian labor regime and this approach went beyond labor force.

The reorganization of agricultural production and the retail sector led food prices to compete with world prices, it positioned the farmers against imported products, the grocers against the supermarket and market chains, and the shopkeepers against the malls. People from rural areas who stormed the cities were unable to find jobs. Clientelist policies that relied on construction, loan mechanisms and social benefits led to the emergence of a giant “surplus population” on the cities’ peripheries. The youth’s potential unemployment was veiled with education.
In short, the market economy began to test Turkish society. Labor, forests, rivers, city plots, mountains and fields were being commercialized. Capital movements, which had started expanding to the periphery countries in the late 1990s, were behind this whirlpool. This flow was concomitant with Turkey’s economic transformation.

For society, “cleaning the deck” meant being subjected to the market economy in all walks of life. Such a radical transformation introduced heavy consequences that only a functional state apparatus could regulate. But more importantly, a political construction was necessary to guarantee social mobilization.

Such details are crucial in understanding why the public supported Erdoğan’s populist policies despite the doubts that lingered over his figure. The “new economic order” served a double purpose for Erdoğan who at times postponed or pragmatically deviated from his political program but never relinquished it.

Taking a short look at the social devastation in the years between 2002 and 2009 - a period that is still celebrated today -, we can see that the unemployment rate, the total individual debt, the unionization rate, the number of strikes, the wealth of the top 100 families and the distribution of wealth were far from ideal.  

The social devastation that was amplified by the pandemic today and the government’s corruption had actually begun during those years. A great amount of wealth was being transferred from the bottom up as the bottom was frightfully borrowing.

President Erdoğan’s political operational arena became meaningful in this context. He came to power in 1994 as the mayor of Istanbul and since then his one and only motivation has always been Islamism. That “cleaning the deck” in 2002, the loan-friendly capital transactions and the resulting problems paved the way for broad support for Islamism. The pro-market and anti-market forces have united to become the fuel of Erdoğan’s myth as the “savior.”

2015 became the starting year of the interest rate/exchange rate spiral and soon it became evident that President Erdoğan could not cover up the ruin anymore and neither was he able to control “the dangerous classes” whose demands he had formerly fulfilled and politicized.
According to Professor Pınar Bedirhanoğlu, “The control of these ‘dangerous classes’ that the AKP has invigorated is no longer only the AKP’s problem. The AKP seems to be the only political power that can manage the social reaction of these segments, thanks to the ‘savior myth’ that this party has preserved to this day. Thus, the AKP has not transformed its own crisis into Turkey’s capitalism crisis but it has made Turkey’s established order its own slave at the same time.”

Turkey adopted a different economic regime in 2002. A despotic political regime was born that fed on both its opportunities and its devastating results. Society was forced to drink a poisonous cocktail.

Today, there is an ever-growing political view that propagates an improvement by getting rid of one of them. The proponents of this view claim that, “All of this malice has happened because the AKP left the regulated market.” They try to promote a return to the previous ways as if it is a new story. However, that society of pre-2001 is an entity of the past, today’s society is one that has been hit by the market economy along with the AKP’s poison.

What prescription can you provide to 10 million unemployed people, millions of people who get poorer and poorer by the day, millions of young people who are neither students nor workers, 8 million people who can lose their jobs at any moment, 17.2 million people in poverty and 7 out of 10 people in debt?

The way to attract those globally floating millions of dollars to this country is not by getting rid of the AKP. It depends on paying the highest interest rate to the investors and this is exactly the same economic policy that has already devastated society.

Kemal Kılıçdaroğlu, the leader of the main opposition Republican People’s Party (CHP) held a video conference with high school and university students over the weekend. “There won’t be any unionization in an environment in which the unemployment rate is high and wages are low. We have a lot of unemployed people. So, the employer will give lower wages and exploit the laborer. And this is the truth of capitalism. We need a strong social state in Turkey to overcome this situation; we need to create more employment opportunities and a higher per capita income”, he said.

Yes, that is the truth but it is also the truth that gets lost among political “tactics” that require a lot of energy to deprive Erdoğan of his “rightist-Islamist” leverages. Changing the present dreaded political situation does not seem likely only through rhetoric, without a clear economic policy that will improve the devastated life of the majority.

November 11, 2020 The captain’s imaginary wars