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 23^rd 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 31^st. 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 31^st 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 31^st 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.

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

Given the continuing economic illiteracy of Turkish policy makers that has lead to the rapid erosion of of the currency and high -- and rising --  inflation this post from 2019 seems even more relevant today (24/11/2021)

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.