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The Turkish lira crisis and Ankara Islamic-conservative policies of Ankara

The Turkish lira crisis and Ankara Islamic-conservative policies of Ankara
©EPA-EFE/SEDAT SUNA  |   People check rates on a board of currency exchange office in Istanbul, Turkey, 23 November 2021.

In the last two months, we have been witnessing bewildering developments regarding the value of the Turkish lira. The fact that it had already lost about 20 percent this year does not seem to have impressed those at the top of the Ankara regime. They do not seem to be affected by the dramatic decline in the per capita income in recent years either, or by the decline in the share of the Turkish economy in the global economy, which has reached the level of 1980 according to IMF studies . Some experts  have come to believe that, given the policies of recent years, a return of the Turkish economy to sustainable performance parameters has become impossible in this century without a radical transformation in governance.

The collapse of the lira and the flight of foreign investors

The historic fall of the lira on November 23, by another 20 percent, was and continues to be covered by international news. But the causes are poorly understood outside of Turkey and the wide circle of pundits who know the developments in this country. President Erdoğan is said to have been putting pressure for the removal of three governors and three Central Bank directors in the last almost three years. All six were allegedly opposed to reducing interest rates in the face of such high inflation. This is dictated not only by the generally accepted theory, but also by the practice of most national banks or the European Central Bank: if the national currency or the euro is devalued, that value can be restored by increasing the interest rate on those currencies.

However, the Turkish president and his regime rule the country according to conservative-religious values ​​and fight openly against high interest rates, convinced that investment, production and exports are essential for boosting economic growth. What they fail to understand, apparently, is that, given the devaluation of the national currency, coupled with a growing inflation rate, an economy like Turkey loses even more as it exports more, because production is based on imports of technology, capital and essential services which, because of the lira getting more devalued by the day, are becoming more and more expensive. It is a vicious circle that can be broken by several measures.

Foreign capital could be one of the solutions, but foreign investment funds, with few exceptions, are rather leaving Turkey, due to the lack of predictability and the degradation of the justice system and of the fundamental rights. The news of Ankara resuming communication with Abu Dhabi is good, all the more so as it is accompanied by the promise that the United Arab Emirates will create a 10 billion-dollar investment fund for Turkey. But it will take time until such a gesture engages others. For now, of the large private equity investors, only BBVA seems to want to continue investing in Garanti Bank, while UniCredit and HSBC are preparing to withdraw.

However, the solutions should come from Turkey itself, starting with raising interest rates and, sooner or later, seeking assistance from international financial institutions (IMF in convergence with the World Bank). Such measures have been successful in all similar cases, including the crisis that Turkey went through at the beginning of the 21st century. However, such measures have been approached by democratic governments, ready to embrace the reforms, the rule of law and the transparency required by the assistance criteria, which is not the case in Ankara now.

Islamization, more important than the economy

The current regime would rather continue on the path of its conservative ideology. In the first decade in power (2002-2012), it refrained from altering the structure of the “Kemalist” state, despite all the imperfections of the 1982 constitution. Since 2012, though, signs of a changing attitude have started to show, through laws allowing the graduates of religious schools to further their studies in the state education system.

In the meantime, textbooks have been altered too. For example, they now contain explicitly anti-Western themes and present martyrdom in jihad as a desirable fate, a view that was embraced long ago by militant islamist groups. And all that while the Directorate for Religious Affairs, Diyanet, has become the best budgeted institution in the country, having the essential role of promoting religious education in schools and in the media, both in Turkey and abroad, where it has already developed a network of branches in more than 145 countries and plans to expand in another 17.

The success of Diyanet, which is accused of assisting the Turkish secret service in its foreign missions, is owed to the massive support provided by the regime. Along with the Maarif Education Foundation, it has benefited from significant budgets, which will get even higher in 2022. Adding to that is the rise of Diyanet to an unprecedented rank in the state protocol. The inauguration ceremony of a new building of the Court of Cassation was attended by President Erdoğan but also the head of Diyanet, Ali Erbaș, who also officiated a religious service .This is unprecedented in the Republican era. Just a few days before, at the ceremonies celebrating Victory Day (August 30), the head of Diyanet was promoted to the 12th place in the state protocol list (he held the 52nd  position in the parliamentary political system). Thus, for the first time, this institution is ranked higher than the Chief of Staff of the Armed Forces in the hierarchy of the republic founded by Atatürk.

President Erdoğan and his collaborators at the top of the regime have been promising for some time that in the first part of 2022 they will make public the proposal for a new constitution that will reflect the values ​​of Turkish society. It is not difficult to guess what kind of values ​​these might be. Another example in this regard may be suggestive.

The Director of Diyanet was accused by the Ankara Bar Association of spreading hate speech by publicly insulting the LGBT community and the HIV patients. The Prosecutor’s Office, instead of requesting an investigation into the said insults, in court, called for the punishing of the claimant with 1-2 years in prison for “insulting a public authority”. President Erdoğan publicly defended his old friend Ali Erbas, the director of Diyanet, and accused the Ankara Bar Association of attacking the state and Islam: "An attack on Erbas is an attack on the state and Islam." Such an explicit equivalence may suggest more important changes in the near future, also by means of the new constitution.

In the past 3-4 years, Turkey has become a country in which any journalist or media company can be fined for ”underestimating Allah” when, in fact, what they do is criticize the regime. Recently, a group of women protesting in Izmir in support of women in Afghanistan and against the Taliban regime were subjected to a judicial investigation initiated the same day by a plaintiff from Kocaeli, which is almost 500 km away. The accusation, taken over by the press that fanatically supports the regime, seems to have been that the group did not actually protest against the Afghan Taliban, but against Islam.

Despite the crisis, the regime does not seem willing to change its policies

Under these circumstances, it is hard to believe that the current rulers of Turkey will change their political approach now, when they seem to have openly become that transformative conservative regime that fanatical supporters had been dreaming of for at least two generations. Although almost 30% of the population is, in technical terms, poor and although the monetary policy and the inflation seem to be out of control, the regime does not seem ready to take the necessary measures, which are imperative but run counter to its ideology and are uncomfortable with regard to its security at the helm of the country. For now, people are afraid to take to the streets in large numbers. The protests after the collapse of the lira were rather fearful. And  rightly so, as they were quickly followed by police arrests and investigations.


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  • The collapse of the Turkish lira is largely the result of Ankara's policies. These are policies dependent on the Islamic-conservative ideology and populist-authoritarian tendencies of the Erdögan regime, the first to seriously challenge Atatürk's view of the state.
  • President Erdoğan is said to have been putting pressure for the removal of three governors and three Central Bank directors in the last almost three years. All six were allegedly opposed to reducing interest rates in the face of such high inflation. This is dictated not only by the generally accepted theory, but also by the practice of most national banks or the European Central Bank: if the national currency or the euro is devalued, that value can be restored by increasing the interest rate on those currencies. However, the Turkish president and his regime rule the country according to conservative-religious values and fight openly against high interest rates, convinced that investment, production and exports are essential for boosting economic growth. What they fail to understand, apparently, is that, given the devaluation of the national currency, coupled with a growing inflation rate, an economy like Turkey loses even more as it exports more, because production is based on imports of technology, capital and essential services which, because of the lira getting more devalued by the day, are becoming more and more expensive.
  • The current regime would rather continue on the path of its conservative ideology. In the first decade in power (2002-2012), it refrained from altering the structure of the “Kemalist” state, despite all the imperfections of the 1982 constitution. Since 2012, though, signs of a changing attitude have started to show, through laws allowing the graduates of religious schools to further their studies in the state education system. In the meantime, textbooks have been altered too. For example, they now contain explicitly anti-Western themes and present martyrdom in jihad as a desirable fate, a view that was embraced long ago by militant islamist groups.
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