Long Read: How Neoliberal is Turkey?

11th February 2018 / Global
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Long Read: How Neoliberal is Turkey?

By Thomas HelmFor many outsiders, Turkey presents a turbulent, paradoxical image. They see an old-time NATO partner whose Islamist leaders routinely censure the WEST. They see a mighty authoritarian regime suffer a coup attempt during a surprising moment of fragility. They see a country fighting a U.S.-backed Kurdish militia in Syria. Perhaps they also perceive high levels of social polarisation. The mainstream media often portrays Turkey as a country where everything has started to go wrong. As an Istanbul-based writer and journalist, I am frequently asked “Isn’t it dangerous?

 

I would like to propose another question much closer to the bone of daily life. How neoliberal is Turkey? In the aftermath of the sensational coup attempt and terror attacks of  2016, life goes on, and President Recep Tayyip Erdoğan’s election winning machine – the Justice and Development Party (AKP) – also cruises steadily forward, unlikely to fall apart anytime soon.

 

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Rapid GDP growth

Neoliberal analysts frequently use GDP growth as a measure of a country’s success. The greatest country is also the richest country, irrespective of whether a tiny, unaccountable slither of the population controls the wealth. As a prominent transparency activist working for acclaimed PODER once told me, if the richest family in Mexico doubles its wealth, on paper the GDP has grown, though on the ground nothing has changed. If anything, living conditions deteriorate, as a rich, elite class, detached from the rest of the population, push up the prices of goods and services for everyone else, and some groups, excluded from the benefits of growth, complain of being left behind.

 

Turkey’s experience of neoliberalism does not easily correlate with this paradigm. Since Erdoğan’s Justice and Development Party (AKP) took office in 2002, Turkey has entered an unprecedented era of growth. The country’s GDP in real terms has more than doubled, but this growth has been spread “relatively” evenly across all income groups. In 2002, the poverty headcount stood at 30.3 percent. By 2014 this figure had dropped to 1.4 percent, according to World Bank figures, though poverty is notoriously difficult to define and these figures should be taken as an indicative rather than an absolute measure.

 

Some commentators have even jubilantly declared that Turkey has become a “majority middle class society” for the first time in its history. This is an astonishing transformation. While the EU rightly laments Turkey’s post-2016 coup attempt crackdown on civil and political rights, most commentators agree that the economic circumstances of the poorer sections of society have improved beyond compare.

 

Infant mortality rates have more than halved (from 46 per one thousand in 2002 to 18 per one thousand in 2017, according to CIA World Factbook). Life expectancy has gone from 72 to 75. Even as Turkey’s major cities struggle with massive population increase and overcrowding, there is a prevailing sense that living conditions and basic services have improved in recent years.

 

What has made Turkey’s experience of neoliberalism so unique? Erdoğan and the Islamist political tradition from which Erdoğan and the AKP hails may provide some clues. Erdoğan comes from one of the poorest neighbourhoods in Istanbul, the former industrial heartland of Kasımpaşa. As a teenager the Turkish president famously sold simits – a type of Turkish bagel – on the street to raise money for his family, one of the poorest, meanest jobs available. But he was also part of a close-knit community, strengthened by family and neighbourhood ties, over which the mosque loomed large, providing hope, meaning and solace. As Nobel Prize winner Orhan Pamuk eloquently reminisces, poverty and Islam in Turkish society have always gone hand in hand. The middle classes had less reason to depend on Allah.

 

This partially explains Erdoğan’s resonance with his core constituency: poor, religious and conservative communities from the Anatolian heartlands and slum neighbourhoods. Whenever Erdoğan delivers a speech (which he does on an almost daily basis), he uses the simple, harsh eloquence of a Kasımpaşa local, his accent and vernacular signalling a social identity that enables a vast swathe of Turkish society to say to themselves “he really is one of us.” This is one reason why on the night of the 2016 coup attempt Erdoğan was able to rally his “people” so effectively. His core constituency sincerely believed his loss was equivalent to their disenfranchisement.

 

A good measure of Erdoğan’s relation to his core constituency comes in the form of a recent survey conducted by Istanbul’s Kadir Has University. In 2017, the number of Turks who believe the government’s economic policies are successful came to 47.7 percent. This number increased significantly among AKP voters. Meanwhile, the respondents who voted for other parties mostly described the economic policies as “unsuccessful.” Here you also have a sense of the deep polarization in Turkish society. The AKP has friends and enemies. There appears to be little space in between.

 

The line between “man of the people” and “majoritarian dictator” is a blurred line, and one which I have no scope to clarify in this article. But in the context of neoliberalism in Turkey, Erdoğan’s social identity and core constituency play a vital role. Neoliberalism was born when a group of radical economists met in the Swiss mountains in 1947 and expressed their concern about the impact of state interventionism. Their famous or for many infamous solution was to “roll back the state” and focus on the “natural wisdom” of the free market. Friedrich Hayek and Milton Friedman were among these economists, whose ideas were initially dismissed as radical but later on gained currency among right-wing political and business elites who saw in them a reflection of their own interests. The point is neoliberalism came from an elitist setting and was propagated by conservative elites the world over. It was a top-down movement. The original name for Friedman and Hayek’s Mont Pelerin Society was the “Acton-Tocqueville” society, but was changed after member Frank Knight protested against naming their group after two Roman Catholic aristocrats. He didn’t want to send out the wrong message.

 

As a man from an intensely religious, working class background, Erdoğan’s entrance to the neoliberal stage was by no means a conventional one. Although the AKP’s brand of political Islam stresses both traditional conservative values and free-market economics, its success owes as much to the collapse of the left in Turkey as to right-wing voter bases. A military coup in 1980 brutally eviscerated Turkey’s left. Thousands of leftists were arrested, tortured and imprisoned. When the dust settled, the Islamists, who were largely untouched by the military, filled the void left behind, winning the hearts of the poor by actively engaging in social work, supplementing Turkey’s threadbare social services with their own charitable endeavours and establishing powerful grassroots networks. It is no coincidence that the AKP’s forerunner went by the name of the “Welfare Party,” hardly a suitable name for a party based on neoliberalism, an ideology that pushes for dismantling the welfare state and privatizing public services.

 

Health

As a party that owes its electoral success to religious, lower-income groups, the AKP occasionally prefers pragmatism to purism in neoliberal policy-making. The party’s stance in health is a good example. From 2002 to 2012, the number of private hospitals in Turkey grew at an average of 14.8 percent per year. In comparison, public sector hospitals grew at a much smaller rate of 1.5% per year. In the same period, the number of private sector surgeries increased 44.3% while public sector surgeries rose by just 10.6%. The private healthcare sector owes its success to government support and a burgeoning middle class. As Turkey transitions into a “majority middle class” society, Turks with more money to spend would rather pay for quality services than visit overstretched public hospitals. Meanwhile, government spending on health as a percentage of GDP has dropped dramatically.

 

While government support for private hospitals appears to connote a classic neoliberal society – a two tier system with quality services for the rich and underfunded state services for the poor – in the context of Turkey under the reign of Erdoğan and the AKP, political pressure flowing upwards from the party grassroots has in certain cases checked neoliberal policy making. A recent essay titled “The AKP between populism and neoliberalism” demonstrates this apparent paradox. From 2010-12 the Turkish public saved some 20 billion Turkish Liras in pharmaceutical expenditure. This was mostly achieved by introducing strict price controls that “reduced the profit margins of pharmaceutical producers and distributors (the populist policy solution), rather than by privatizing the cost of medicines through, for example, raising out-of-pocket payments (the neoliberal policy solution).”

 

This case study reveals a tension in AKP policy making, as the interests of its two major constituencies (lower-income and Islamic business groups) come up against internal pressure from the party’s neoliberal-minded technocrats and election-focused leaders. It also suggests that the Turkish state can override corporate interest. In other neoliberal states, the opposite is often true. Activists in those countries routinely lament the impact of lobbying and the “revolving door” on democratic governance. For many, the words “neoliberalism” and “corporatism” have become synonymous.

 

Housing, the construction sector and the environment

Old slum neighbourhoods or gecekondus – the product of mass rural-urban migration in the 20th century – have long played a prominent role in Turkish politics. The AKP has gone further than previous governments to address gecekondus residents, many of whom form an integral part of their core constituency.  The authors of “The New Turkey and its discontents” stress the “patrimonial relationship between the AKP, big business and the residents of poorer neighbourhoods that stand to gain much from Turkey’s construction boom.” The construction sector has become not only a source of lucrative foreign investment and a driver of GDP growth, but a political tool to enrich government-friendly businesses and strengthen the AKP’s appeal to religious, lower-income groups.

 

There have been winners and losers in the government’s gecekondu redevelopment scheme, though on the whole, the winners have been AKP supporters. The scheme usually worked by allowing the property owners to live in the new development provided they pay the difference between the old and new dwelling in monthly instalments. Many gecekondu home owners were real financial winners and duly grateful to the AKP. Even if they decided not to live in the new development, they could sell their deeds for inflated prices to speculators, jumping into the middle class or thereabouts almost overnight. Property developers close to the ruling AKP elite also became rich. But the scheme was far from perfect. Tenant residents were not usually offered compensation and faced direct eviction, while some gecekondu neighbourhoods were replaced with luxurious gated communities, with swimming pools and shopping malls, often without the consultation of the city’s inhabitants.

 

The more standard neoliberal practice of selling off public land has drastically risen under the AKP. The government has pursued aggressive policies of deregulation and commodification of both urban and rural space. A 2003 law provided the minister of finance with the ability to terminate licences on public property in order to sell it off. Further laws in 2003 and 2004 expanded this power to include schools and hospitals. As with the gecekondu neighbourhoods, often there has been little public consultation.

 

Popular rage and frustration over such policies came to a head with the famous Gezi Park protests in 2013, when protestors from diverse sections of society assembled to stop the government from paving over one of Istanbul’s few remaining green spaces to put up an Ottoman-style shopping complex. Although construction on Gezi Park was miraculously halted, the protests were brutally suppressed, and the strength of the state harshly revealed. Noam Chomsky has likened the episode to an emblem of the “great wrecking ball of neoliberalism.” The destruction of shared space and resource for the sake of quick growth and a “shopping mall” economy is a common scene across the neoliberal-led world.

 

The irony is Istanbul needs green space more than new shopping centres. An inordinate amount of shopping malls have appeared across the country in recent years. The total nationwide stood at 145 in 2007. By 2017, that figure had leapt to 375.  Istanbul alone has 117. Many commentators, including Turkish Deputy Prime Minister Ali Babacan back in 2014, have voiced concerns of a bubble. There is a risk that the poorly regulated construction sector finishes with a bust to rival Spain and Ireland in 2008. In 2013, some 23 shopping malls were converted into hospitals, private schools or office buildings. According to surveys, some 10% of existing shopping malls are in the process of exiting the market, even as developers plan to build more. The total number is expected to reach 448 by the end of 2018. Due to an absence of regulation, many of the malls have been built in city centres, hastening the closure of many smaller businesses in the vicinity.

 

As if to complement this brutal, rent-seeking approach to urban planning, the AKP also tends to largely ignore environmental concerns. The “Canal Istanbul” is a case in point and may also prove a step too far. The aim of this $17-billion megaproject is to build a second 45-kilometer waterway parallel to the Bosphorus in order to provide an alternative shipping route to the already congested Bosphorus. The canal will rapidly open fertile agricultural lands to the west of Istanbul to urbanization and is likely to damage Istanbul’s water sources. Environmentalists also fear that pollution will flow from the Black Sea into the Mediterranean. The project could also severely affect marine life, change sea currents and water temperatures on both sides. Black sea water has a greater salinity than the water of the Sea of Marmara. Erdoğan has famously called the project a “crazy project” and his critics agree. The route was finally unveiled on 15 January, 2018 after a long period of secrecy.

 

Development and crony-capitalism

 

Rent seeking motives behind urban management together with the exclusion of the population from the decision-making process is the norm in the AKP’s Turkey. Referring to the “Canal Istanbul,” Kemal Kılıçdaroğlu, leader of the main opposition Republican People’s party (CHP), and Erdogan’s main rival has said:  “This project is not about people. It’s about making AK Party supporters rich.” The same has been said of the third Istanbul airport and the reportedly underused private-public-partnership-funded third Bosphorus Bridge. These megaprojects serve the dual role of enriching a loyal business elite while proving to the populace that the government is transforming the country into a truly worthy civilization centre.

 

The extent to which the Turkish state engages in crony-capitalism still has the power to shock and astonish. Since 2002, the Turkish government has made no less than 150 amendments to the Public Procurement Law (the law that regulates the award of state contracts). These amendments have increased discretion in awarding contracts. The number of contracts awarded by open auction fell from 100,820 in 2005 to 65,016 in 2014. Meanwhile, the number of contracts awarded through less competitive and less transparent methods rose from 41,157 to 58,680.

 

Increased discretion in awarding contracts facilitates substantial favouritism in Turkey’s political economy. The European Council continuously criticizes the public procurement processes in Turkey as “non-transparent and discriminatory.” The deliberately de-fanged Court of Accounts, designed as a check on opaque dealings, has been non-functioning for years. As researcher Esra Güraker points out, in the AKP period “corruption has been centralized and exists and prevails through making highly debated, notorious new laws and regulations.” The December 17-25, 2013 corruption probes, initiated by Erdoğan’s old allies turned enemies the Gülenists (widely believed to have been behind the 2016 coup attempt), revealed the essentials of these extensive state-business interactions and how they contribute to insider influence and the creation of privileged networks dependent on AKP favour. A new class has been on the rise since 2002, the Islamist nouveau riche: Businesses that use religion to form connections with the government.

 

A “rolled forward” state

Forget rolling back the state, if anything the state has rolled forward. Turkey’s neoliberal political economy has been achieved and maintained through a series of state interventions. In this respect, the AKP has simply continued an authoritarian process that began with a devastating coup in 1980 and long, repressive years of a pro-World Bank pro-IMF military regime.

 

It was the military-led state that oversaw the initial neoliberal transformation of the Turkish political economy in the 1980s and 90s. In “The Economic Transformation of Turkey: Neoliberalism and State Intervention,” Nilgün Önder stresses the power of the military regime to force through reforms to remove or dismantle “earlier regulations and institutions associated with the more state-interventionist, trade-protectionist, import-substituting industrialization, which was the main economic policy in the 1960s and 70s.” The state also established strong economic and political institutions to allow the new liberalised economy to operate “without requiring direct forms of state control or economic intervention.”  Turgut Özal, the leader who oversaw these reforms, had worked for the World Bank. The era was one of economic “liberation” and social oppression.

 

This nascent neoliberal system soon collapsed into chaos, inadvertently facilitating the rise of Erdoğan’s AKP. In February 2001, stocks plummeted and the interest rate reached 3,000 percent.

 

Large quantities of Turkish lira were exchanged for U.S. dollars or euro, causing the Turkish central bank to lose $5 billion in reserves. In the first eight months of 2001, 14,875 jobs were lost, the dollar rose to 1.5 million liras, and income inequality rose from an already high level. Many commentators directly blamed Turkey’s neoliberal reforms for the crisis, which had established an export-oriented economy increasingly dependent on foreign investment.

 

In 2002 Erdoğan surged to power and continued to implement the IMF reforms handed to Turkey in 2001 during the heat of the crisis. Under the AKP’s reign, inflation dropped to acceptable levels. A rapidly growing economy was born again from the wreck. Similar to Putin, who “rescued” Russia from Yeltsin’s chaos in the 1990s, Erdoğan has earnt himself the title of a strong-man-nation-saviour, a patriach who protects his family and punishes his enemies.  He has remained the dominant player in Turkish politics ever since.

 

Labour Rights and the shadow-image of GDP growth

In the wake of the 1980 military coup, workers rights were gutted and trade unions restricted. Erdoğan’s AKP has not made any substantial changes to redress the dire situation of workers rights in Turkey. While the international community has praised Turkey’s “economic miracle,” the conditions of labour have largely escaped scrutiny.

 

Work place deaths have soared alongside GDP growth. The country had the highest rate of worker deaths in Europe and the world’s third-highest in 2012, according to the International Labor Organization (ILO).

 

From 2002-13, 12,686 people died in work accidents. In comparison, the 2016 coup attempt killed just 241 people. While the country harps on “July 15” (the date of the foiled coup attempt) and the “Fetullah Gülen Terror Network” (believed responsible for the coup attempt) debates concerning workers rights remain eerily absent from mainstream Turkish news outlets. Unlike the July 15 “martyrs,” who are routinely used to inflate the AKP’s sense of self-importance, the far more numerous “martyrs” of Turkey’s “GDP growth” have been forgotten.

 

There is a clear shadow image to GDP growth. Turkey’s “economic miracle” is largely based on manpower for construction, farming and textiles, which are labour-intensive industries that require a constant supply of cheap labour. Capitalism of this sort operates under a simple logic. Set up your factory in a deprived neighbourhood and pay desperate people low wages to make you a fortune. “Pro-business” deregulation and weak trade unions ensure the power-balance tilts in favor of employers. High levels of informal “unregistered” workers also help to keep production costs down and Turkish exports “competitive,” no matter the hidden human cost.

 

Human rights are the first casualty of Turkey’s drive to be a top EU export market – an investigation by the Centre for Investigative Journalism (London), The Black Sea and Correct!v and Freitag in Germany maps out child labor deaths in Turkey

This image shows a map of child workplace deaths in Turkey from 2012-15. The data comes from Gündem Çocuk (Agenda Children), a children’s rights organisation based in Ankara, and Istanbul Isci Sagligi ve Is Guvenligi Meclisi (Assembly for Workers’ Health and Work Safety in Istanbul). This is a screen shot of a data map produced by the Black Sea journalism platform.

 

Child labour is also an ongoing problem. According to the Centre for Investigative Journalism, the Turkish government’s “pro-business policies” have been responsible not only for the deaths of adults but also impoverished children (see image above). From 2012-15 at least 150 children below the age of 18 were killed in work-related accidents. When Turkey implemented the ILO’s International Programme on the Elimination of Child Labor (IPEC) initiative in 1994, child labor fell from over 2.2 million in 1994 to 886,475 in 2006, according to the Turkish Statistics Institute. But the IPEC ended most of its Turkey programmes in 2007. Since then, the numbers have been slowly creeping back up.

 

Impoverished refugee children fleeing the Syrian Civil War supplement these numbers. According to an investigation by The Guardian, in 2016, thousands of Syrian children were working illegally in the Turkish garment industry where low wages and poor conditions are common. The Guardian investigation includes interviews with 12-year-old Shukri, who “often works 60 hours a week” on sewing machines “earning 600 Turkish liras (£138) to help support his family.”

 

Textiles and clothing are among the most important sectors of the Turkish economy and foreign trade, according to official government sources. In 2016, the sector enjoyed a 18.4 percent share in total export volume. The economy ministry is quick to tout Turkey’s role as 8th largest clothing supplier in the world and 3rd largest suppler in the world. The total value of clothing exports was $16.26 billion. But the reality on the ground for the workers who actually produce these clothes seldom enters the national conversation.

 

Even workers in supposedly “elite” white collar professions often feel overworked, underpaid and overstressed. Working long six-day weeks is widespread and commonplace. The infamous Law 4857 denies employees the right to take even a single day of holiday in their first year at a company.

 

They first need to prove themselves before indulging in such a luxury. A colleague at daily Hürriyet recently mentioned a phrase that frequently summarizes Turkish attitudes towards their workplace. That phrase is “öğrenilmiş çaresizlik,” and translates as a “learnt hopelessness” or “a despair to which one has accostemed oneself.” It was originally used to describe the mental state of circus elephants.

 

These labour conditions – from illegal sweatshop labor in Turkey’s garment industry to the more urbane blues of Turkey’s white collar workforce – are unlikely to change under AKP governance. The unionisation rate is estimated to be 8.9 percent of the entire workforce. Due to the high number of non-registered workers, the effective ratio of the workforce covered by a collective bargaining agreement could be as low as 3 percent. Restrictive trade-union legislation, criticized repeatedly as contradicting international conventions on labour rights, has hindered the ability of unions to obtain legal recognition. Moreover, employers use various tactics to discourage unionisation, including intimidation, harassment and dismissals of union members.

 

Inequality

High inequality levels have always been an inherent feature of the Turkish state. The country ranks as one of the most unequal countries in the G-20, with a Gini coefficient of 0.39, well below the OECD average of 0.32. Though absolute poverty levels have declined under the AKP, inequality levels have remained relatively constant, even as GDP growth is spread “relatively” evenly across all income groups. Between 2007 and 2013 real labour income growth increased by almost 20% for the average earner while the top 10% of earners saw their income increase by 22%. Meanwhile, the real labour income of the bottom 10% of working population grew at close to 13% during this period.

 

These figures provide only a faint consolation. The Inclusive Development Index 2018 report, published by the World Economic Forum (WEF), highlights that in spite of its strong growth and low levels of “absolute poverty,” Turkey’s income and wealth inequality remain high.

 

Moreover, the situation at the beginning of 2018 shows signs of increased instability and fragility. A spike in living costs, stagnant wages, a depreciating lira, creeping inflation (10.3 percent in January 2018), strained ties with the West and rising unemployment suggest substantial risks ahead.

 

It will be interesting to see how well the AKP fares if Turkey enters an economic crisis as serious as the “chaotic” early 2000s.

 

Conclusion

 

So how neoliberal is Turkey? Less a neoliberal state than an authoritarian majoritarian system that has assimilated various aspects of neoliberalism for its own ends, contemporary Turkey presents a complicated, sometimes surprising image. Poverty levels have dropped, though high inequality levels persist. The markets are liberalised, though companies with government ties receive preferential treatment. Health services have improved, though a two-tier public versus private or rich versus poor system has emerged. A booming construction sector has generated enormous wealth, though fears over a potentially catastrophic bubble arisen from under-regulation remain. GDP has grown, though labour rights and trade unions have been suppressed, and children and adults alike are dying because of poor working conditions.

 

This is the image of Turkey in 2018. Add to this backdrop the more sensational and attention grabbing 2016 coup attempt, jailed Amnesty International activists and “anti-terror” military operations in Syria, and you should see a more complete image of what is happening in Turkey.

 

Thomas Helm currently works for Turkish daily Hürriyet Daily News. Previously he worked for Spanish daily La Vanguardia, the International Service of Human Rights (a UN-focused NGO) and Indian daily Kashmir Observer. Go to his website HERE

 

 

 

 

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