Tuesday, 10 December 2019

'None Of The Above' Should Win This UK Election

After one of the most moronic, unedifying campaigns I have ever witnessed British voters are going to the polls on December 12 to choose between a collection of deeply unpopular and flawed political parties with leaders I doubt their mothers would trust.

            The Conservatives behind Boris Johnson, a man of absolutely no known principle or conviction other than self-aggrandizement, appear headed for victory on the back of his mantra-like repetition of ‘Get Brexit Done’. Ask the inarticulate Johnson about the weather and his automated reply will be ‘Get Brexit Done’ All the phones at Conservative headquarters are probably programmed to answer any call with that nonsense. It’s worse than hearing Pachelbel’s Canon in every lift in London.
Boris Johnson shows the chances of 'getting Brexit done' by the end of 2020
             Granted, the Brits are heartily sick of the entire Brexit fiasco, but they are fooling themselves if they think this election will get Brexit done. The devil is truly in the details that will be hammered out in negotiations that will mostly likely extend well beyond Johnson’s mendacious claim of the end of 2020. If he secures a comfortable majority in parliament we can look forward to some rapid Johnson back-peddling on that time table. But he is very practiced at back-peddling and U-turns. Right now he is beholden to the collection of Little England fantasists in his own party who believe that somehow a shrunken, isolated Britain will flourish in a world dominated by large, powerful trading blocs. A rational person would think once or twice about abandoning a tight trading relationship with the UK’s largest partner in order – perhaps – to sign deals independently with countries that have limited trade with the UK. But then, no one ever accused the rabid Brexiteers of thinking rationally. And the Brexiteers’ Holy Grail of an independent trade deal with the United States? Good luck with that one. The UK will be at the complete mercy of a domineering United States. How sad it is to see a once-proud nation reduced to going around the world with a begging bowl.

            And Labour? Jesus wept! Yes, the social welfare safety net in Britain is torn and tattered. Sadly, the current Labour Party is dominated by a so-called radical wing whose thinking really hasn’t advanced very far from ideas first proposed by Lenin’s Bolsheviks at the Second Party Congress in 1903 – held in London at what undoubtedly has become hallowed ground by the current Labour leadership. Labour’s answer to the clear social issues facing Britain is to make everyone poorer. Forget Britain as an aspirational, growing economy where everyone – not just hedge-fund managers – has a chance to grow. Labour views the country’s economic pie as fixed, static with the only question being how to divide that shrinking pie into ever smaller pieces. Soak the Rich is a popular concept in many countries until you realize that that same tiny sliver of the population provides a hugely disproportionate share of the country’s taxes – taxes that could pay for needed social programs. By pretending to march forward with their eyes firmly fixed on the rear-view mirror the Labour Party will find that it has lost touch with much of its traditional base.

Labour leader Jeremy Corbyn trying to figure out the question
            In this environment of deeply damaged, untrustworthy major parties one would like to think that a rational third party might provide a reasonable alternative. Alas, no. The Liberal Democrats were once the great hope of people who had voted Remain in the 2016 referendum. But the party has had a terrible campaign that focused solely on the unrealistic goal of repealing the famous Article 50 setting in motion the great EU divorce. To compound their problems the party said it would agree to form a coalition with Labour in the event of a hung parliament where no one has a clear majority. This terrified many Tory Remainers who decided to hold their noses and stick with the Conservatives rather than risk Labour getting into power through the back door.

At least he makes one laugh laugh and not weep
            The only comic relief of this dreary campaign has  been watching Nigel Farage channel his inner Dirty Harry as he bangs on about the evils of the European Union. His idea of negotiating a withdrawal agreement is to take a smoking Magnum 45 into the meeting room and tell the assembled Brussels bureaucrats to ‘Make My Day, Punk!’ I’m sure he has a comic career on one of the American cable channels. Or maybe Donald Trump can find a job for him negotiating with North Korea’s mercurial leader Kim Jong-un.

Friday, 28 June 2019

Political Earthquake Rattles Turkish Political Status Quo

The recent crushing defeat of Turkish President Tayyip Erdoğan’s chosen candidate for mayor of Istanbul – the country’s largest city and centre of economic activity – demonstrated much more than the skill of a young, dynamic opponent with a clear message. The defeat revealed wide cracks in the dogmatic, resentful, autocratic veneer that Erdoğan had drawn over the country – cracks that will be almost impossible for him to repair.

            Another key message of this election – and why it heralds deep changes in Turkey – is that the slow, sometimes painfully slow, evolution of democracy is much longer lasting than the previous quick fixes of military coups that only made things worse in the long run by papering over rather than solving sharp divisions. Yet another message is that the term ‘Islamic democracy’ is not a complete oxymoron. When given the chance people in countries with an overwhelmingly Moslem population can indeed vote for positive change.

Ekrem Imamoglu and his wife Dilek. The new symbol of Turkey?
            From the time he first became mayor of Istanbul in 1994, then prime minister, then president with unchecked powers Erdoğan has feasted on the ‘we-vs.-them’  theme where the ‘we’ were the struggling masses of Anatolia and the ‘them’ were the so-called ‘White Turks’ of the traditional political, military, and economic elite. The message only got stronger when the bulk of rural Anatolia emigrated into Turkey’s booming cities. Erdoğan’s message of how the social, religious and economic concerns of the masses were ignored by the White Turks resonated loudly. The sad thing is that he was not completely wrong.

            Rainer Hermann, Middle East editor for the Frankfurter Allgemeine Zeitung, lived for almost 20 years in Turkey and the Gulf and is one of the most astute analysts of the region. He has travelled widely throughout Turkey and spent many days in the burgeoning suburbs of Istanbul observing how they have changed over the last 15 – 20 years. The festering slums have been replaced by apartment blocks, water systems, roads, public transit, and schools. ‘What Erdoğan failed to notice were the social, political and economic changes in the third and fourth generation of Anatolian immigrants into Turkey’s cities. Now almost 80% of the Turkish population now lives in the country’s 30 largest cities. By this time, they are thoroughly urbanized and their expectations are similar to many young people throughout Europe. In short, the ‘we’ he used to rely on has become the ‘them’.’

            With this background it is easier to see how Erdoğan’s proxy candidate in Istanbul,  the old faithful Binali Yildirm, had very little chance against the much younger and energetic Ekrem Imamoğlu who had previously been the mayor of one of the city’s several sub-districts. Yildirm sang the same old song, but this time the chorus was not with him.

            Another very good analyst of Turkish affairs, Kadri Gursel, noted that the Istanbul election amounts to a ‘political earthquake. The June 23 result is nothing less than a tectonic shift in Turkish politics, the impact of which was felt in all of Istanbul’s districts.’ He went on to say that Erdoğan ‘could well lose Turkey down the road because any political change in Istanbul reflects on the whole country sooner or later. A megapolis of 16 million people, Istanbul is a role model emulated by the rest of the country. It is a trendsetter in almost everything, from lifestyles and consumption habits to sports, culture and arts. And any trend that Istanbul does not adopt remains local, failing to spread across the country. This goes for political trends as well. One cannot win over Turkey without winning over Istanbul.’

            This defeat could also have a serious impact on Turkey’s foreign relations. It is one thing to punch above your weight and use the bellicose language of a neighbourhood bully when supported by the full-throated roar of 80 million people. It is quite another to act that way when the economy is in free-fall and that ‘full-throated roar’ has diminished to a whimper. A weakened domestic position will very quickly result in a weakened international position. Very few leaders will be willing to pay attention to or do any favours for someone they may start to see as a lame duck.

            This development couldn’t have come at a worse time for Erdoğan who is facing problems and increased isolation on multiple fronts – Syria, the Kurds, Iraq, the US, the European Union, Saudi Arabia and the Gulf, Cyprus, Greece, Russia – just to name a few. Take the Russian S-400 missiles for example. He is damned if he takes them and damned if he doesn’t. The American Congress has threatened serious economic sanctions – such as excluding Turkey from the advanced fighter jet F-35 program – if Turkey carries through with its purchase of the Russian missiles. Erdoğan is desperately lobbying President Trump to overrule the proposed sanctions, but Trump would have a great of difficulty in doing that because the sanctions were approved unanimously in the famously partisan Congress. Turkey has very few friends in Washington these days. If he doesn’t take the Russian missiles who knows how Russian President Putin will react. Not calmly one suspects.
Which one Mr. President? You can't have both.

The next step in this rapidly unfolding drama is the much-talked-about creation of a new political party led by former stalwarts of previous AKP governments. Erdoğan could be in a very difficult position if they succeed in forming such a party and peeling away significant numbers of AKP members of parliament. Then he could find himself as isolated domestically as he is on the international front. If that happens his days as an autocratic one-man ruler could be over.

Wednesday, 19 June 2019

TfL Gives A Master Class In How Not To Win Public Approval

Meetings of London councils are usually fairly placid affairs dealing with burning topics ranging from rubbish removal to parking violations. A recent one in the Royal Borough of Kensington and Chelsea, however, had all the excitement and even blood lust of a prize fight – one that should have been stopped out of mercy in the early rounds.

            Transport for London (TfL) entered the so-called ‘consultation’ about proposed road changes in an up-market attractive part of London with all the self-righteous arrogant zeal of  early Christian crusaders out to slay any and all unbelievers. Unfortunately for TfL these particular unbelievers were well organized, well informed and well armed. The historically minded might have recalled the Battle of Hattin on July 4, 1187 in the Holy Land. How could anyone, the zealots from TfL assumed, oppose such 'beneficial' plans to increase bicycle access? Quite easily, it turned out.

TfL failed to impress this crowd
            The essence of the plan published more than a month ago was to remove one of the lanes of traffic, cut down 27 mature trees that have graced this area for more than 100 years, and reduce the number of bus tops serving the area. All this was in the name of improving access for bicyclists, which as ‘everyone knows’ is a self-evident good thing. Well, maybe not so self-evident. Don’t worry about the trees, TfL said, we will re-plant most of them. Great, but in the 100 years in takes to grow these trees, the area will look as if it has been given a buzz cut.
Some of the trees that TfL wants to cut down to add a bike lane
            TfL did not do itself or the cause of bicycling in London any favours by the aggressive and self-righteous way it approached this audience of about 600. Instead of actually listening to objections TfL simply tried to hammer home the ‘wisdom’ of its scheme as if anyone who opposed it was a hopeless Range Rover-driving Neanderthal. Will Norman, the TfL commissioner for bicycles, even went so far as to accuse Londoners of not exercising enough and that increased bicycle lanes were the answer to that problem. I have heard of ‘mission creep’, but this is the Nanny State run amok. Are we to feel the stern, disapproving look of TfL every time we sit down and put our feet up?

            This was supposed to be a consultation, but at no time did the TfL invite comments to counter its claims that bicycles are the answer to London’s undeniable road congestion and air pollution. TfL cited the number of accidents along this stretch of road as a rational for the separate bike lane. Unfortunately, TfL at no time offered any information about those accidents. Did they all involve bicycles? We were left to assume – without any context or supporting information – that the separate bike lane would prevent such accidents. Maybe yes, maybe no. Without further information it's impossible to say.

            When confronted with the criticism that such a separate bike lane on a main east-west artery would inevitably lead to increased congestion as two car lanes were squeezed into one TfL breezily cited ‘studies’ that showed there would be no increased congestion with the attendant increased pollution from idling cars, trucks and buses. TfL had no answer at all to the obvious problem at Lancaster Gate where they installed a separate lane for less than 200 feet with disastrous effect on congestion on the busy Bayswater Road. Will TfL recognize this error and remove the separate lane? Don’t count on it.

            But perhaps the most questionable part of TfL’s claims was that these bike lanes – benefiting a scant 3.8% of London’s road users – are the answer to the city’s air pollution and congestion problems. Increased use of bicycles would indeed reduce pollution if – and only if – TfL could prove that most of the bicyclists had switched to bikes from cars or motorcycles rather than from public transport. Otherwise the impact on air pollution is quite limited. Did TfL provide such a study? No.

            Given the relative numbers of passengers involved one obvious way to encourage people out of their cars is to improve is London’s public transport. While there are an estimated 650,000 bicycle journeys every day in London, there is a daily bus ridership of more than six million , and there are more than five million tube passenger journeys every day. One might think that improving and increasing those services and keeping buses flowing smoothly would be higher on the agenda than creating bicycle lanes.

            Increasing the fleet of electric cabs and private cars would be an obvious target. There are 21,000 black cabs serving London today, and at the moment only 500 of these are electric. Before many more electric cabs can be added to the fleet the number of charging points has to be sharply increased from the current 150. Electric black cabs are a great idea, but currently they have range of only 80 miles on one electric charge. The average London cab can easily do twice that amount in a normal day. The range can be extended to 400 miles with an on-board petrol-powered generator – but that sort of defeats the purpose.

            The TfL also did not help its cause by remaining mute on the subject of 'bicycles behaving badly' by violating traffic regulations or weaving in and out of pedestrians on pavements with impunity. 

            The TfL presentation did nothing to allay the fears of the Kensington audience, most of whom were vehemently opposed to the scheme seen as a serious threat to the quality of their neighbourhoods. TfL’s proposals were met either with stony silence or cat calls. The highlight was when the RBKC council leader and another council member said the council would reject TfL’s scheme. The audience erupted in cheers.

            Did the TfL take this defeat with good grace and a commitment to review its proposals? Hardly. Will Norman, the bicycling commissar, blamed the council for a ‘political stunt’. It was like a failed politician blaming ‘stupid’ voters for his defeat. Was the council’s decision greeted as a manifestation of local democracy at work? Hardly. ‘Selfish’ and ‘narrow minded’ were two of the milder epithets in social media. One commentator even brought up the dreaded Brexit argument by claiming ‘Leavers = Cars while Remainers = Bicycles’. Not quite sure how that logic works, but there you have the state of political discourse in Britain these days.

Friday, 10 May 2019

Did Turkey's Shrewdest Politician Miscalculate This Time Around?

It flies in the face of recent Turkish history even to consider the possibility -- but has President Tayyip Erdoğan badly miscalculated the chances for his ruling AKP party in the June 23rd re-run of the Istanbul mayoral election? Against all odds the opposition candidate Ekrem Imamoğlu won by a very narrow margin in the original election on March 31st. Incensed at losing the base of his support Erdoğan ordered the allegedly independent High Election Commission to review the results for fraud. Unsurprisingly, the Commission found enough ‘evidence’ to annual the election and order a re-run.

             Since 2002 Erdoğan has had an almost perfect score in Turkish elections. When his party didn’t do well he simply ordered another election in which the offending results were predictably reversed. Given his total control of the media, suppression of opposition, control of the judiciary and, most importantly, control of patronage the only surprising thing about those elections is that his victory margin was not wider.
Erdogan with his son-in-law

            On the surface, the Istanbul do-over appears to be more of the same. Reject the unfavourable result and resort to time-tested means of government spending, immense rallies, accusations that the opposition is nothing more than a front for ‘foreign interests seeking to weaken Turkey,’ even more suppression of the media, etc. etc. to secure a comfortable victory in the re-run. Is there a chance this one will be any different? Very difficult. But this time the situation is a bit different.

1.     For the first time, the economy is not Erdoğan’s friend. The economy is in recession and the currency is sinking fast as the hapless Central Bank and Finance Ministry remain firmly on the sidelines. Prices are skyrocketing with inflation at 20% plus. Unemployment is about 15% and even higher among young people. Turkey used to boast proudly that it was almost self-sufficient in food stuffs. Now, after more than a decade of mismanagement Turkey’s once-dominant agriculture sector is decimated. The country even has to import onions. Grumbles about high prices in the market place often lead to reversals at the polls.

Does Binali Yildirm have the drive and stamina to carry Istanbul for the AKP

2.     The candidate. Erdoğan is used to running against candidates who make a three-toed sloth look energetic. Now, in Ekrem Imamoğlu, the AKP is facing a young, smart, articulate, very active candidate who won against all odds in March. In contrast, the AKP candidate is the old stalwart and long-time Erdoğan ally Binali Yildirm who seems tired and vaguely disinterested – looking forward to putting his feet up and having a nice cup of tea rather than chasing votes around Istanbul. A nice enough person, but one who doesn’t compare well to the younger, more dynamic opponent. One local commentator put it very well when he said that Imamoğlu doesn’t represent just a single party. He represents a much more widespread, general movement that wants change. This wave could catch AKP off-guard.
Is Imamoglu riding a big wave of popular support

3.     The opposition is finally getting smart and tactical. For years Erdoğan feasted off the idiocy of the opposition that continued to split into factions that individually never threatened AKP’s stranglehold on the electorate. In the March 31st election the opposition parties – mainly the Kurdish HDP – put aside their petty feuds and decided to support Imamoğlu. And guess what? Together they beat the AKP. The lesson seems to have been learned because the HDP has already announced that it will support Imamoğlu. Important in Istanbul because it’s the largest Kurdish city in the world. There’s even a chance that Imamoğlu will get the support of the small religiously-oriented Felicity Party that could refrain from fielding its own candidate.
4.     The AKP is not as united as previously. The AKP used to enter elections with a full-throated, unified roar of support for whoever the candidate was. This time seems different. It appears there were many within the AKP unhappy about annulling the March 31st election. Apparently the decision to challenge was promoted strongly by Berat Albayrak, the President’s extremely ambitious son-in-law who also serves as Finance Minister. Rumour has it that he is not universally liked within AKP.
5.     Then there’s the perpetual rumour of a new party being formed to appeal to the traditional socially-conservative AKP voters who like democracy and oppose the one-man rule of Tayyip Erdoğan. While these rumours have been circulating for years, they seem to be getting more traction now. They focus on the well-respected former Finance Minister Ali Babacan and former President Abdullah Gül. If – and it remains a very big ‘if’ -- this come to pass it could seriously threaten Erdoğan’s total control by peeling away up to 50 AKP members of parliament. This is why Erdoğan’s supporters are doing everything possible to throw mud on Babacan and Gül by, among other things, calling them closet supporters of the exiled cleric Fetullah Gulen who is blamed for the abortive 2016 coup attempt.

            Does all this mean that Erdoğan’s AKP will lose the new Istanbul election? Hardly. It is very risky forecasting defeat for a leader who controls so many levers of power – the media, the judiciary, patronage and government spending.  I am sure that Erdoğan will use every official and some unofficial tools to control the vote. Every bit of slander he throws at the opposition is repeated endlessly by his acolytes on TV or in the printed media. I doubt that Imamoğlu will be allowed much more than token appearances on TV.

            But Imamoğlu has a few tools of his own. Social media is powerful in Turkey, and he has a big presence there. He is also an energetic and tireless campaigner who emphasizes his appeal to all the varied segments of Istanbul’s 13 million people. Then there’s the hard-to-measure but increasingly apparent Erdoğan fatigue factor. People seem to be getting tired of the bombast that is beginning to sound hollow as it is no longer accompanied by economic triumphs. Maybe Istanbul is the place to start.

Monday, 6 May 2019

The Secret To Turkish Economic Policy Lies in Linguistics -- Not Financial Analysis

Once again, a European-based Turkish financial analyst Turkey shares hard-won insights into the current status of the Turkish economy. Policy makers like the Central Bank governor, the Minister of Finance and, of course, President Tayyip Erdoğan all seem caught wide-eyed in the headlights of the oncoming recession. Whatever the cause – intra-party feuding, personal ambition, long-held financial prejudices or simple incompetence – the policy makers seem unable to develop a credible program to reverse course. Our analyst sympathizes with those who struggle to understand Turkish economic policy and proposes a unique place to begin the study. Because he (or she) would like to continue to visit his (or her) homeland without fear of instant jailing, he (or she) prefers to remain anonymous.

            I get calls from economists, investors and financial analysts around the world with the same problem. They are all extremely well educated and have impressive professional resumes. Yet they are all driven to frustration by the difficulty – the impossibility – of trying to understand the twists and turns of Turkish economic policy. Help us find a way through this maze of mis-information, constantly missed targets, and general confusion they plead. I’m tempted to tell them to take two aspirin and move onto another country. But duty calls. What I really should tell them is that the secret to understanding current Turkish economic policy making lies not with classical economic or financial theory. If they really want to understand what is going on they should start with the unique structure of the Turkish language itself. Seriously.

Turkish Finance Minister Albayrak pleading for help?
            One of the most difficult aspects of the Turkish language is something called ‘the reported past tense’ – where the root of the verb carries an ending -miş or -mış. Which one you use depends on something called ‘vowel harmony’, but that’s a subject for another day. The important thing to remember is that when you hear either of these two endings the speaker is referring to events that were reported to him. He didn’t actually witness them himself. In this way the speaker is absolved of all responsibility for the reported action. Take the verb gitmek - to go. The simple past tense is gitti – he, she, or it definitely ‘went’. However, when you say gitmiş you make no claim to being definitive. Maybe he, she, or it went. Or maybe they didn’t. You’re just reporting what someone said might have happened, i.e. don’t blame me if they didn’t actually go.

            I think one of the most telling uses of this ‘reported past tense’ is mış gibi yapmak – roughly translated as ‘to pretend as if’. But it goes beyond this simple translation to define someone – or an organization – as ‘not having the necessary skills/intention to perform their assigned function, but rather pretending that they are performing just to fool others’. The closest English concept is ‘ticking the boxes, but the boxes are empty.’

             Perhaps the most glaring example of mış gibi yapmak is the Turkish Central Bank. The Central Bank, as sanctified in many laws and regulations, is supposed to be independent and is supposed to pursue a policy of price stability and ‘inflation targeting’. After decades of ultra-high inflation Turkey, under the auspices of the IMF, moved to what is called ‘implicit’ inflation targeting in 2002. A few years later it moved to ‘explicit’ inflation targeting, i.e. state a target and try to stick to it. Although the country hit the 5% target only once the inflation fight was a relative success for a few years as it at least remained in single digits – considered a huge improvement. In 2016 the situation changed with the appointment of a new Central Bank governor, Murat Çetinkaya. With President Tayyip Erdoğan demanding high growth regardless of cost things got out of control with inflation now running at 20% and threatening to go even higher. What went wrong? This is where mış gibi yapmak comes in.

Turkey's Central Bank -- independent or a mere rubber stamp?

            In order to fulfil its stated function the Central Bank needs three things: independence, fully flexible exchange rate policy, and transparency/accountability in policy. In other words, turn control of monetary policy over to capable technocrats who can think beyond the next election. Protected – in theory – from political meddling the technocrats should convince the public about their seriousness in maintaining stability. And through the various reports they are required to publish they are accountable to the general population/government/parliament. In theory the Central Bank does all these. But, unfortunately, theory does not live in today’s Turkey.

            With the President facing a number of critical elections and referendums he demanded easy money and high growth. Unwilling or unable to resist this relentless pressure the Central Bank’s main policy since 2016 has been mış gibi yapmak. There are eight regular Monetary Policy Committee meetings a year where decisions are taken a simple majority rule. The MPC sets the inflation target and the governor reports to the parliament and government. If the inflation target is not met the Central Bank must publish an inflation report detailing the reasons for not meeting the target every quarter.

            All fine, except things get a little cloudy in practice. It’s hard to maintain independence when, as widely speculated, the Central Bank governor has to get approval from the Finance Minister and President before every MPC meeting to hike rates. Given President Erdoğan’s fervent ideological stance against interest rates in general it takes a very strong Central Bank governor to go against that stance. And the current governor has shown no indication of such strength. As a result, the Central Bank has been able to hike rates only as a last resort when the currency was crumbling daily. On top of this the Central Bank has using its rapidly diminishing reserves to defend the currency and then trying to conceal the extent of this move by borrowing US dollars from state-owned banks to maintain the fiction of strong reserves.

            But the Central Bank carries on as if nothing has changed. It still publishes 100-page inflation reports, still does fancy presentations talking about the global economic environment, how they expect inflation to come down to 5% in the next 36 months, and how they have a tight policy stance – despite the fact that banks are forced to keep their deposit rates below the official rate. Despite all the verbiage and well-drawn charts the reports give very little detail about exactly how all these lofty economic goals will be attained – what concrete policy steps the Central Bank will take. In short, these reports are a victory of quantity over quality -- rather like the student who doesn't really know the answer but tries to fool the examiner by filling pages and pages with random information.

            They may convince the only audience that matters – the President -- but they’re not very good at convincing the average Turkish citizen who is rushing to convert his Turkish Lira deposits into hard currency. When the proverbial ‘Ayşe Teyze’ – Auntie Ayşe – doesn’t trust her own currency good luck bringing any foreign investors to Turkey.