For the past year, Turkish President Recep Tayyip Erdoğan has exploited his country’s state of emergency to rule by decree, purging government ranks, imprisoning political dissenters and crushing independent media. But for all the attention paid to Turkey’s slippage in democratic norms, critics have largely ignored the heavy toll his brand of authoritarianism has taken on the country’s economy. The effects could be disastrous for Turkey’s future.
When Erdoğan first became prime minister in 2003, he inherited a struggling economy with a long list of structural problems. His greatest achievement during the first half of his 15-year tenure at the pinnacle of political power was to stick to a reform plan devised by the World Bank’s former Vice President Kemal Derviş and reorient Turkey’s foreign policy toward trade diplomacy.
Turkey was already suffering from slowing growth and the highest percentage of youth not in employment, education or training, and the lowest labor force participation among OECD members. Morgan Stanley branded the country as one of “the Fragile Five” — overly dependent on short-term investment to finance its gaping current account deficit.
A key challenge for Turkey’s economy has long been weak governance. In 1995, a grand coalition of center-right and center-left parties established the Economic and Social Council, a quarterly consultative body to assemble labor, public, and private sector representatives to facilitate good governance.
But Erdoğan has refused to convene the Council since 2009, despite repeated calls to do so from the opposition. Under the current state of emergency, most economic decisions no longer involve parliament deliberations. They are simply the result of arbitrary decrees.
Erdoğan, for example, transferred the government’s stakes in Turkey’s flag carrier airline, two top public lenders, and fixed-line phone operator to the country’s newly-established sovereign wealth fund — and he did this simply with a decree.
The controversial fund is neither transparent nor accountable, and it’s exempt from the oversight of the Court of Accounts, which is responsible for auditing public administrative bodies.
To make matters worse, the fund is managed by cronies, including an Erdoğan adviser who once claimed foreign powers were trying to kill the president by “telekinesis.”
Turkey’s deteriorating rule of law has also eroded private property rights. In the past year alone, the government seized 879 businesses with assets worth over $11 billion, prompting potential buyers to worry about prolonged legal battles over ownership. The appointment of party loyalists to run these firms has only aggravated cronyism and mismanagement.
Read more: Turkey’s economy: The next casualty of Erdoğan’s state of emergency – POLITICO