Economic policy

Turkey: Erdogan’s economic policy impoverishes the Turks | International

A woman bought bread at a subsidized price last Friday in Istanbul.YASIN AKGUL (AFP)

Saygin gets up early every day to bake bread, rolls and imitate. But every day, he does it with less conviction. “I’m fed up. There are people who can’t buy bread and some of it remains unsold. So the next day you do less. And the next day less. If this continues, I’m going to have to close.” Eight people worked in his oven. Now it’s just him and a part-time master baker. “Last year I sold the sea bass for 1.5 lira. Last week at 2.5. This week at three. Next time maybe four. When the dollar goes up, the factories raise the price of flour [se ha incrementado un 200% en un año] and I have to raise the bread”.

As the price of such an essential product has risen, the queues of people who wait every day in the rain and cold for the kiosks of IHE, an Istanbul City Hall company that offers bread to subsidized prices, also increased (1.25 lira).

Behind these images of crisis there is a reason: the complete collapse of the Turkish lira (despite the astonishing rise on Tuesday, since February it has lost half of its value) following the monetary policy of the government of Recep Tayyip Erdogan, who aims to lower interest rates at all costs. In early December, the Turkish president announced his “new economic model”, which rivaled those undertaken by China and other Asian economies in the 1980s and 1990s. take advantage of the devaluation of the lira and the fall in the price of labor to make Turkey an exporting power and thus make it less dependent on foreign financing. Moreover, he wants his model to show results in less than a year.

“There is no model and there is nothing. Erdogan cannot control the situation and he invented this story of the new economic model,” criticizes economist Mustafa Sönmez. “Of course there are these types of models, but they cannot be applied in this unstable environment where no one knows what the prices or the exchange rate will be next week, which means that no one can plan your economy,” adds the expert.

Erdogan knows that the economy will be his weak point and that his re-election will be at stake in 2023. In recent weeks, three youtubers who asked about the family’s financial situation on the street were arrested and placed under house arrest; A man who took down a portrait of Erdogan and threw it on the ground has been jailed, and another man, in this case from the town where the president’s family is from, was arrested after complained in an interview about the economic situation, then three of the neighbors told him that they had been beaten and, finally, the town hall cut off his running water, according to the newspaper One day. These are relentless responses to ordinary citizens who are suffering the crisis of their flesh, but which reveal the fear which awakens within the Government which doubts the victorious account of the president.

In a country that lives glued to currency trading screens, the president told Turks to stop watching the exchange rate and promised to compensate savers when the Turkish currency plummets. “Our currency is the lira, not the dollar,” Erdogan says. But Sönmez points out that the Turkish economy, including its export industry, needs to import to produce, and that these imports have to be paid for in dollars, euros or other hard currencies, which ultimately leads to a price increase.

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University economists know it, and poultry traders know it too: “If the dollar goes up, the price of chicken goes up. The food they eat is imported and paid for in dollars. In one month, the kilo of chicken breasts went from 30 to 45 liras, so people buy half as much as before”, complains the one who prefers not to give his name.

To counter the huge loss of purchasing power suffered by Turks, the government announced a 50% increase in the minimum wage – paid by almost half of Turkish workers – to 4,253 liras (294 euros), even s It remains to be seen how long it will take for runaway inflation to swallow this increase. According to Istanbul’s statistics office, prices rose by 50% last year, a figure that rises to nearly 59% according to calculations by the ENAG academic group.

The World Bank has warned in a report of “increasing poverty” in Turkey. Inequalities too: at the same time as the “queues” are multiplying, the fashionable restaurants and bars of Istanbul, the most expensive city in the country, are overflowing. “The gap between rich and poor is wider than ever. Because inflation affects those who live on a minimum wage or those who work for a daily wage much more,” explains Sevval Sener, of the NGO Deep Poverty Network. In Istanbul alone, it is estimated that there are some 1.3 million workers without contracts or social protection among street vendors, garbage collectors, undeclared workers… who will not be able to benefit from the increase in the minimum wage. “During the pandemic, many lost their jobs. Now, even if they work, they don’t earn enough to cover their basic needs because of rising prices. So many people are skipping meals or picking up food from the trash,” says Sener.

Supply issues

The sinking of the lyre also caused supply problems. In some supermarkets, the amount of non-perishable goods customers can buy has been limited to prevent them from running out, and in pharmacies, it is increasingly common for pharmacists to point out certain medicines when they arrive. with a doctor’s prescription and say, “This brand is not on the market.” The pharmacists’ union has warned that it is impossible to find hundreds of drugs. The Ministry of Health sets the prices of the medicines it imports at a fixed exchange rate (the current rate is three times lower than the real price), and given the loss of value of the Turkish currency, the big pharmaceutical companies refuse to sell to Turkey.

“All producers [nacionales] they are focusing on exports because it is becoming less and less profitable to produce for the Turkish market,” explains analyst Yavuz Barlas on the television channel Haberturk. This is palpable, for example, in construction, where it is increasingly difficult to find cement while Turkey is the world’s sixth largest producer. “If you want cement, there is; but you have to pay for it at an export price”, explained the promoter of a work in October. Rising prices and the difficulty in supplying materials are weighing on one of the most powerful sectors of the Turkish economy, which employs two million people.

For Erdogan, inflation and supply problems are the product of ‘speculators’ and ‘enemies of Turkey’, so he sent inspectors to fine supermarket chains, car dealerships and other businesses whom he accuses of “hoarding supplies”. “To sell when prices go up. “Work more, produce more and export more”, he demanded last Thursday in a speech in which he demanded “sacrifices” in order to defeat what he dubbed the “war of economic independence” against the ” external forces” conspiring against Turkey. . .

The baker Saygin, whose business is located in a working-class neighborhood loyal to Erdogan, is also a supporter of this thesis, continually fueled by the pro-government media: “The lira is falling because [el presidente de EEUU, Joe] Biden wants to overthrow Erdogan”. Many supporters of Erdogan’s party, the Islamist AKP, or his partner in government, the ultra-nationalist MHP, share this theory, even if more and more voters in the ruling party attribute the poor economic situation to the management of the Executive (17% of AKP voters and 27% of the MHP according to an AREA survey). A Metropoll poll shows that support for the AKP among poorer Turks has declined to a greater extent than among higher income groups. Saygin himself, Erdogan’s voter, is beginning to doubt: “I also have complaints about the policy of this government.”

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