Turkey: economic crisis batters Erdoğan regime

After nearly 19 years in power, the strongman image of Turkey’s longest-sitting head of state, Recep Tayyip Erdoğan, is rapidly deteriorating. The world economic crisis triggered by the COVID-19 pandemic has delivered another, severe blow to his crisis-ridden regime.

Erdoğan’s ruling Justice and Development Party (AKP) has been plunging in the polls, with the most recent putting support for his party in the region of 30 percent: the lowest in its almost two decades of rule.

The AKP’s rise to power coincided with a world economic boom, which in Turkey translated into the largest boom in the country’s history. This gave room for the AKP to grant substantial reforms, and for Erdoğan to present himself as a reformer in the eyes of the masses. This was the source of Erdoğan’s popularity and support for his ruling AKP. Those conditions are now unraveling fast.

The masses are suffering

Turkey now faces a severe economic crisis. Soaring inflation and a free-falling currency amidst double-digit unemployment are pushing the masses to the edge.

Since the start of the year, the currency has lost more than 45 percent of its value, and more than 30 percent in November alone. While the state agency, Turkish Statistical Institute (TÜİK), is reporting that inflation stands at 21.31 percent, the Inflation Research Group (ENAG), an independent body, has calculated the real inflation figure is 58.65 percent. Turkey is heavily reliant on imported raw materials and energy sources, meaning every drop in the value of its currency increases the prices of basic goods. Turkey imports more than 93 percent of its oil and more than 98 percent of its natural gas. Rising energy costs fuel inflation as a result of the pass-through effect, as the rise in price of these commodities pushes the prices of all other goods and services even higher. Energy prices have been hiked multiple times this year, driven by the weak currency but also by the increase in global energy prices and supply-chain bottlenecks.

lira Image iwaryo FlickrSince the start of the year, the Turkish currency has lost more than 45 percent of its value - more than 30 percent in November alone / Image: iwaryo, Flickr

Basic food products have become so unaffordable that most people are only consuming staples such as bread, pasta and eggs. Supermarket clerks have been sharing images of price hikes on goods, snapping photos of decks of discarded price tags over the week. The price of essentials like sunflower oil has increased by more than 137 percent over the year, while the cost of flour has increased by 109 percent and tomatoes by 75 percent. There are reports of bakeries coming up with schemes whereby volunteers pitch in to pay for bread for the bakeries to give away for free to those who cannot afford it. Bread lines for food are becoming a common sight, winding around city blocks across the country.

The price of petroleum gas has increased by more than 102 percent and price hikes on natural gas have left millions of households without heating and electricity. Housing prices and rents are also skyrocketing, with the latter having increased by more than 70 percent.

Unemployment figures have remained in double digits since 2013. According to the Confederation of Progressive Trade Unions of Turkey (DİSK), nearly 8 million people are unemployed. Unemployment rates among youth and women are even higher, at 22 percent and 29 percent respectively.

According to research published by the Consumer Rights Association (THD) in July, based on figures received from the main unions and TÜİK, more than 16 million people live below the hunger limit, which is set at 2,327.8 TL per member of the family (assuming a family of four). A further 50 million people live below the poverty limit, which the organisation sets at 7,582.25 TL. Thus, out of a population of 84 million, 66 million are poor. These startling numbers reveal the depths of the inequality in the country.

Workers are aghast at how quickly their wages are melting and at their declining purchasing power. The minimum wage, 2,825 Turkish Lira (TL), which was worth $382 dollars at the start of the year, is now worth $205 dollars. More than half the workforce are on minimum wage, which is well below the poverty limit of 10,190 TL and even below the hunger limit (3,190 TL).

Workers in Kayseri, the ‘birthplace’ of the AKP, spoke with the Evrensel Daily about their declining living conditions, with one saying: “They [the AKP] make the rich richer and live off our backs.”

Another worker added: “The employers - and they’re all in the parliament - they want us to work overtime. When can we spend any time with our family? They turn workers into slaves.”

When asked what the solution was, one worker responded: “We all need to unite”. These are revealing words coming out of the heartland of the ‘Anatolian Tigers’, Erdoğan’s traditional base. The economic crisis has violently torn up the bonds that once connected these layers of the population with the party they once catapulted to power.

Erdoğan defies ‘economic orthodoxy’

At a time when interest rates are being raised around the world to fight rising inflation, Erdoğan is pressuring the Turkish Central Bank to cut interest rates. His open defiance of the rulebook of bourgeois economics is now making daily headlines, as bewildered bourgeois analysts sound the alarms.

After cutting rates by another 200 basis points on 18 November for the third consecutive month, the lira hit another record low. The following Monday, Erdoğan doubled down, refusing to bow to pressure, declaring that Turkey will win this “economic war of independence,” adding: “We are either going to give up on investments, manufacturing growth and jobs or take on a historic challenge to meet our own principles.” The next day, the lira suffered one of its biggest crashes in its history, tumbling as far as 13.45 to the dollar, triggering protests across the country.

Bourgeois economists repeatedly highlighted Erdoğan’s “unorthodox belief” that higher interest rates cause inflation when it is really the reverse, and attribute his insistence upon this point to the “authoritarianism” and “erratic” character of his personality. While Erdoğan’s personality is a factor, in reality he is attempting to prevent a social explosion.

In the past two years, Erdoğan has sacked multiple Central Bank governors and finance ministers in order to tighten his grip on the country. Recently, he sacked Lütfi Elvan, the finance minister and the only person left in opposition to him, and replaced him with Nureddin Nebati, an AKP loyalist, amid a further plunge in the currency on 1 December. Turkey has spent its limited foreign currency reserves in order to prop up the lira twice in the past two weeks. These interventions barely slowed the lira’s freefall while reserves were spent up.

The Erdoğan regime is desperately attempting to keep the economy afloat, but is quickly running out of options.

When the economic crisis sparked by the pandemic hit, the Turkish economy was already plagued by inflation, a depreciating currency and unemployment.

The regime was forced to take drastic measures to keep the economy and living standards afloat. The government expanded access to credit, which had already been underway in 2019 after Turkey entered recession in 2018. And in fact, the Turkish economy even grew by 1.8 percent in 2020, being one of few economies in the world to grow at all.

According to government figures, more than 71 percent of the population are in debt. Since January 2021 Turks have accumulated nearly 128 billion TL in loans. The total debt has reached more than 1.3 trillion TL. Banks are already faced with an increase in delayed payments and an increase in non-performing loans. Millions of people have been pushed further into debt and are now facing legal proceedings for unpaid debt.

Erdoğan thinks he can manage the crisis by issuing more debt, but he seems to forget the crucial point here: debt has to be repaid - with interest! By piling up debt as a means of overcoming the crisis, he is only sharpening the contradictions of Turkish capitalism and paving the way for more instability.

Foreign debt is currently at over 60 percent of GDP. Over the next 12 months, Turkey needs to pay or refinance close to $170 billion of mainly dollar-denominated debt, the equivalent of 23 percent of Turkish GDP. Turkey does not have enough reserves to cover this debt, and with the lira depreciating fast, this debt is getting more and more insurmountable.

Rising energy prices are adding to Turkey’s already enormous import bill. In September alone, Turkey’s energy import bill soared by 65.7 percent. The regime desperately needs foreign capital to finance $450 billion of external debt, but Turkey is once again experiencing capital flight. In the case that the government prints more money, which is likely, inflation will only accelerate.

But what choices does Erdoğan have? If he raises interest rates, he puts pressure on a very fragile economy, and causes a chain of bankruptcies, leading to mass poverty and mass unemployment. But while low interest rates keep credit flowing, they also mean high inflation which, in turn, continues to devalue the lira and push the masses further into debt and poverty, which is also eroding support for his regime.

Erdoğan has no way out of the crisis of Turkish capitalism. Indeed, there is no way out of this crisis within the confines of the capitalist system. Erdoğan, who was propelled to power because of an economic crash, which wiped out all of his rivals, may very well be facing a crash himself.

The rise and fall of the AKP

The AKP swept to power in 2002, riding a wave of discontent with all the establishment parties after the 2001-2002 financial crash in Turkey. The newly formed party tapped into the anger of the masses, presenting itself as an anti-establishment party that could offer a fresh start to a country afflicted with inflation, a currency crisis, unemployment and poverty. It promised prosperity, peace and democracy.

Protect Your Republic Protest Image とある白い猫 Wikimedia CommonsRising anger is leading some layers to the main opposition, the CHP, but this is only because there is no working-class alternative / Image: とある白い猫, Wikimedia Commons

The pre-2008 world economic boom allowed the AKP to keep these promises to a large extent. Turkey’s location at the border of Europe, offering cheap labour, served the more advanced nations well. Turkey saw an enormous influx of capital. Between 2002 and 2011, Turkey was able to achieve an average growth rate of 7.5 percent while inflation and interest rates fell. GDP per capita in Turkey tripled between 2002 and 2010. The regime was able to give substantial concessions, linking the historically underdeveloped Anatolian areas to the rest of the country with a new network of highways, roads, bridges, and airports, while carrying out reforms in healthcare, education and housing. Peasants and workers were drawn into the cities and industrial boomtowns were created across the Anatolian regions. The living standards of the majority of the population rose in parallel with economic growth, and millions of Turks were lifted out of poverty.

As long as the economy was advancing and a general rise in living standards was taking place, and in the absence of a working-class alternative, the AKP was winning elections and even increasing its support base.

But once the 2008-2009 world economic crisis of capitalism hit, the regime became increasingly dependent on cheap credit and speculative growth. While the Erdoğan regime was able to achieve very high rates of growth, the country was in fact accumulating an enormous amount of foreign-denominated debt. In 2013, the tide turned. Inflation and unemployment began rising and the currency began its steady decline into 2017. All of these factors culminated in the 2018 economic collapse.

With each of the crises that Turkish capitalism has suffered in recent years, the regime has been pushing more and more of the weight of these crises onto the shoulders of the masses, exposing the true class character of Erdoğan and his ruling AKP. The crisis of the system has brought all the contradictions to the surface. This is the source of Erdoğan and the AKP’s plunge in the polls.

The Erdoğan regime has attempted to divert the class struggle by embarking on foreign interventions, dividing the working class along national lines by whipping up anti-Kurdish hysteria. He has attempted to tighten control over his own weakening regime, concentrating ever more power in his own hands, purging the state apparatus and social institutions of opponents, replacing them with loyalists, while imprisoning journalists and critics.

The appointment of an AKP loyalist as rector to Boğaziçi University in Istanbul by presidential decree triggered a wave of student protests in the city. In order to stem the movement, the regime removed the rector, replacing him with another AKP loyalist, but has failed to fully suppress the students.

Pressure is building beneath the surface of society, and the working class is beginning to enter into the arena of struggle. A wave of strikes and protests are spreading across the country. Erdoğan’s regime has not been able to suppress the labour movement, on the contrary, organised labour is strengthening as workers turn to the unions, looking for a way out of the crisis. As workers begin to fight back against the attacks on their living standards, their struggles are further raising their consciousness and serving to transform a layer of the working class.

With this rising anger, some layers are turning to the main opposition, the CHP, but this is only because there is no working-class alternative. Kemal Kılıçdaroğlu, the leader of the CHP, is now making the same promises Erdoğan made almost two decades ago. He has promised the “rule of law”, an end to “corrupt officials using their posts to enrich themselves”, and to bring in “peace, democracy and justice”.

In reality though, Kılıçdaroğlu is just a representative of the Kemalist wing of the Turkish ruling class, which has no fundamental differences with the AKP. In fact, in recent years the supposedly ‘secular’ CHP has taken to running religious and increasingly conservative candidates in order to win over former AKP supporters. Kılıçdaroğlu has announced a “reconciliation” tour to “make amends” with all those sections of society that the CHP had “hurt” in the past… including the conservatives.

In the absence of a working-class alternative, the CHP stands to gain from Erdogan’s crisis, but the workers and the poor will learn quickly that they are a dead end too and they cannot offer any solution for the masses. Only the working class can lead the way out of the crisis of capitalism by fighting against the whole bourgeoisie, both the so-called secular Kemalist wing and the conservative Anatolian bourgeoisie.

The rich mock the masses

As the masses wrestle with poverty and hunger, Erdoğan is attempting to use religion to contain the anger of the masses, saying: “Our lord says, we will test you with a little fear and hunger and loss of wealth, lives and goods”. But Erdoğan isn’t living with hunger or a loss of wealth and goods. This past summer, a newly built second presidential palace was unveiled. A summer property on the Mediterranean coast, valued at $74 million USD, it was built with money stolen from the public coffers.

While workers are struggling to buy bread, Emine Erdoğan, Erdoğan’s wife, is telling the masses to “reduce their portions”, and that they can save money by “drying mangoes and storing them”. AKP officials who have been exposed in corruption scandals continue living in luxury while ridiculing the masses, from telling them to “eat less”, and that it is their patriotic duty to accept the economic situation even if they have to eat “onions and bread for days or months”, pointing out that “our prophet also lived on an empty stomach”.

workers demo Image DISK TwitterThe Turkish working class has grown by the millions in the last two decades and it is beginning to enter into struggle / Image: DISK, Twitter

While the TGRT, an AKP-linked news channel, aired a celebratory segment on the decreasing cost of cheap labour in Turkey, bragging over the fact that Turkey has the cheapest (i.e. highly exploited) labour in the world, and that therefore capital will flow into the country. But today is not 2002, capitalism is in crisis and there will not be an influx of foreign capital into Turkey.

Erdoğan is assuring foreign investors “they’ll always be pleased with the great profits” and that the “door is wide open in Turkey”. What Erdoğan means is that Turkey is a place where workers have few rights, and that he will ensure that the working class will be served up on a plate to the capitalists. Erdoğan would rather push the working class closer to starvation than walk away from power.

The Turkish people increasingly see the AKP as a shameless group of liars and thieves, who have gotten rich off exploiting workers, privatising state assets, and blatant corruption. More and more workers understand that they are being pushed into poverty so the ruling class can protect their profits and become more wealthy. Erdoğan’s appeals to Islam no longer have the same effect as they once had. His denial of the economic crisis, the conspiratorial rhetoric (the culprit, according to Erdoğan as usual, are “foreign agents”), and his performative lashing out are only feeding into growing anti-Erdoğan sentiment. The entire situation is preparing the way for a social explosion.

The boom under Erdoğan led to massive economic development and industrialisation in Turkey, and it also led to massive proletarianisation: the growth of the class the capitalist system’s profits depend on, and the class that is destined to act as the gravedigger of the capitalist system. The Turkish working class has grown by the millions in the last two decades and it is beginning to enter into struggle. The crucial task is to build a revolutionary alternative with a clear Marxist programme to connect with the struggles of the working class and prepare a revolutionary movement that can overthrow, not just the Erdoğan regime, but the entire capitalist system, and begin a new period in the history of Turkey.