Saturday, 22 October 2016

Economic Realities Begin To Hit Home

Forget the usual loud-mouthed bleating from Turkish President Tayyip Erdoğan about Turkey’s exclusion from the coalition fighting to retake the Iraqi city of Mosul from the sadistic Islamic State. Even if he is right, almost everyone outside Turkey has become sick and tired of his bombast about Iraq and several other topics. Simply put, other leaders and diplomats are no longer willing to separate the message from the messenger.

But the real news out of Turkey has nothing to with Erdoğan’s bruised amour-propre, coups and counter-coups. No, the real news as discussed recently by two well-known journalists is the widening fault line in Turkey’s economy.

In the most historic shopping mall of all, namely the Grand Bazaar in Istanbul, 600 shops have been closed because of an ‘unspoken’ economic crisis. Four decades ago such news toppled a shah in Iran.”
Hundreds of shops in the Grand Bazaar have closed

She notes that others from hairdressers, to landlords, to posh restaurants on the hills overlooking the Bosphorus are also suffering from a lack of customers.

A respected jeweller with shops in the Grand Bazaar and an up-market shopping center complained that “There are no Western tourists coming, no Western businessmen, no Japanese either. We are off the cruise calendar until 2018. The only shoppers here are Arabs that stay in the hotel and use the gift cards given by the hotel to buy clothing. There is no light at the end of the tunnel.”

In another column she quotes the founder of a menswear clothing line as saying that shopping-mall driven consumption has plunged drastically. In an attempt to ease the high consumer debt burden the government said debt could be restructured into 70 installments – albeit at high interest rates. But a young banker notes that such steps are not enough. “So many people have applied for debt restructuring because they know they will never be able to pay it even if it was 140 months,” a young banker said.

One tell-tale cause of this consumer distress is that the unemployment rate has reached double digits, and Özyurt notes that the unemployment rate among university-educated youth has risen to 13%.

Economist Güven Sak writes that at a time when the Turkish government is countering a myriad of real or perceived enemies it is making itself even more vulnerable to outside influence.

“Turkey’s domestic savings rate was around 14% for the latest year on record. It’s around 50% in China, 30% in Russia, 20 % in Poland and South Africa. So 14% is a low number, even for a developing country, and it is declining. We all know that living on other people’s money makes Turkey more vulnerable, yet we plan to go ahead with it.”

Sak continues by noting that Turkey’s growth rate has slowed and its current account deficit has increased. “The global financial crisis has made Turkey a more vulnerable country.”

“So is there any wonder why the Turkish Lira has been depreciating rapidly again this week? Forget about President Erdoğan’s Mosul remarks or the Moody’s downgrade for a minute. . . . Look at the high risk strategy of low growth and less savings. It is bad driving that is pulling the lira down.”

Sadly, none of this economic reality has so far penetrated Erdoğan’s virtual world dominated by foreign (read American, Israeli and European) conspiracies aimed at thwarting Turkey’s growth, grandiose regional dreams, and his long-standing desire to create a ‘Turkish style’ executive presidency – in other words one without any of the checks and balances that define a modern democracy. Finance Minister Mehmet Şimşek, a rare voice of economic rationality in the government, appears to have lost whatever small degree of influence he may have once had. His challenge now seems to be keeping a straight face when telling sceptical Western bankers that black is white.

Erdoğan and the ruling Justice and Development Party (AKP) have no serious domestic political opposition, and are pretty much free to make whatever changes they want in the country’s political structure regardless of any external pressure or criticism. The economy is a different matter. Ignoring financial realities and global volatility sooner rather than later will lead directly and quickly to economic pain for ordinary citizens.

Sunday, 16 October 2016

Don't Fear -- The Center Should Hold

Anyone outside the United States looking at the presidential election campaign has every right wonder just what the hell is going on. How can a country as indispensable as the United States seem to go so far off the rails with an election like this? How can anyone as manifestly unprepared as Donald Trump seriously contend for the top job in the world? Is Hillary Clinton really the She-Devil that Trump and his dwindling number of supporters claim? Good questions. But I would suggest that the fears are a bit over-hyped. The Center will hold.

The core of Trump supporters, those angry white men who feel left out of the rapidly changing world and who subscribe to just about every conspiracy theory you can think of (the world is run by a Global Establishment out to screw ordinary people), is indeed loud and very angry. They have seen just about every other ethnic group in the U.S. pull ahead of them, and they are mad as hell. They make great TV with their inflammatory, end-of-the-world rhetoric, and their posturing as the modern version of Dirty Harry cleansing the world of low-life blacks, Hispanics, Asians, liberals, any and all immigrants, and – perhaps worst of all – college educated women.

I hate to admit it, but the United States has always had groups like this. Usually their rantings are left to the more remote parts of the country and the darker corners of the Web, but until now they have never had a megaphone quite like Donald Trump – perhaps the most unlikely champion of the down-trodden one could ever imagine. Trump is very good at Reality TV and whipping up crowds of already dissatisfied people, but that’s as far as it goes. Anyone listening for serious policy proposals will be very disappointed. Why bother with details, when you can drive the crowd into a self-righteous frenzy of hatred?

And he has the answers?? Does he even know the questions?

The only consolation I can offer is that the hard political, vote-getting influence of these groups is easily over-stated. Yes, they make good TV – much better than the usual boring stump speeches by most candidates -- but they have never been very good at translating all their rantings into votes on the national level. Unless the history of more than 200 years of electoral politics in the United States is about to be upended we will wake up on November 9 and find that the vast Center of collective common sense has held. We have had some very strange presidential candidates over the years -- hard core segregationists, hopelessly naïve socialists, or other attention seekers – who appeal to relatively narrow, but vocal groups. In the final count, however, they had no appeal to the broad mass of voters who are much smarter than anyone gives them credit for.

And what about Hillary Clinton? Is she Evil Incarnate portrayed by the more rabid Republicans? Or will she prove to be one of the more effective presidents? One thing is for sure. Just about everyone in the world has an opinion about her -- as you would expect of someone who has been in public life for more than 30 years.  That experience is both her strength and weakness. From the strength point of view, the United States government is a very intricate piece of equipment and at least she knows how it works without lengthy on-the-job training. The political weakness of that experience is that it identifies her closely with the status-quo that many people feel is failing to deal effectively with the nation’s challenges. The much-ballyhooed WikiLeaks releases have so far only shown a shrewd, intelligent, practical politician. Hardly the stuff of nightmares that the far-right crowd was hoping for.

Can she bridge the wide partisan gap?

I have never met the woman, but I respect the opinions of friends and acquaintances who have worked with her in the Senate and the State Department. One career State Department official told me he has never been in meetings with anyone as smart or well prepared as Hillary Clinton. “She’s unbelievable,” he said slightly awed. “She reads everything. And she expects you to have read everything as well.” Then he paused and added. “But she’s also the nicest boss I have ever had. She doesn’t suffer fools, but she wants to help you rather than demean you. She’s not on an ego trip at your expense.”

Perhaps her biggest challenge will be working with Republicans in Congress to address the real problems facing the country. Can she find a way to break down the thick partisan walls that make it so hard to find solutions? Will she be able to find a common ground with all the Republicans who fled from Donald Trump and voted for her? For example, the thousands who have lost their jobs due to factory relocations overseas deserve to have their problems addressed in a true bipartisan effort rather than see all solutions crushed under the weight of political ideology. If she can accomplish this she will go down as one of the great presidents. If she fails, that strong Center of common sense may start to erode.