Sat Feb 24, 2024
February 24, 2024

Turkey: The beginning of the “Raki Effect”?

In 1994, the Mexican financial crisis had a strong international impact called the “tequila effect”. Currently, the crisis lived by the Turkish currency (lira) also begins to expand to other countries. Has the “raki effect”[1] began?
By: Alejandro Iturbe
The current crisis of the Turkish lira was triggered by the announcement of the North American president Donald Trump, who said he would set 50% and 20% tax rates on steel and aluminum imports with Turkish origin. The Recep Erdogan administration answered by increasing the taxes of products they import from the United States, such as alcoholic drinks, rice and automobiles [2]. This is a new step in the scale of political and economic tension between both governments.
Immediately, the Turkish lira suffered a 20% devaluation in the markets, and it accumulates a loss of 40% of the value throughout the year, reaching its lowest point historically [3]. It is estimated that in the next four month, inflation will go up to 22% and throughout 2018, it may reach 50% [4]. This was not the only negative impact over Turkish economy. Three international qualification agencies regarding the economic-financial situation of the countries (Moody’s, Standard & Poor’s and Fitch) lowered the category of the Turkish foreign debt in the long term. They questioned the “stability of the Turkish bonds” and considered that the measures taken until now by Erdogan are “insufficient” and it is “not very likely that it will stabilize the currency and the economy in a lasting way” [5]. This drop in the qualification means the new bond placements shall pay a higher interest than what they paid before.
Until now, the Turkish foreign debt (430 billion dollars) had good qualifications and was relatively under the control of the Erdogan administration, with a reasonable relation with the GDP of the country (something less than 50%) according to the current parameters of the over-indebted States [6]. However, due to the rapid weakening suffered by the lira, it is very likely that the country must resort to foreign financing each time more. This will not only be more expensive for the country, but imperialism also will surely demand the Erdogan administration greater economic adjustments.
A Bit of History
The current Turkey Republic is the result of the dismantlement of the Turkish-Ottoman Empire, which occupied during the XIX century an extensive territory in Asia, North Africa (Libya and Egypt) and Eastern Europe (the Balkans). The different European potencies sought to evict them from Europe and Africa, encouraging the independence processes in some cases and in others, taking control over the colonies.
In 1866, Egypt broke with the Turkish Empire and “associated” to the British one. In 1911, the “Italian war” led to the loss of Tripoli and Cirenaica (current Libya). In 1913, the defeat of the Balkans War meant the loss of Albania, Bulgaria, Greece, Montenegro and Serbia (its European territories were reduced to the coast region of Marmara, where Istanbul is found, the main city of the country). This same year, they had to accept that Kuwait became “an independent emirate under British protectorate”.
The defeat of World War I (1914-1918), where it fought along Germany and Austria-Hungary against the Entente (Great Britain, France and Russia), meant the dismantlement of the Turkish Empire in the Asian territories, which was ratified in the Paris Conference (1919). The Sevres Treaty (1920), between France and Great Britain divided these territories in areas of influence and sought to deepen the consequences of the Turkish defeat. Even Great Britain attempted to evict them from the few European territories they had left through Greece and take away Istanbul in the so-called Greek-Turkish War (1919-1922), considered by the Turkish as an Independence War. During part of the war, the British troops occupied several regions of the country. The Greek-British attempt was defeated and the British troops were evicted from the Turkish territory.
The second graduation official, which had achieved this Turkish victory (politically educated for a decade in the “young Turkish” movement), rose and defeated the Imperial sultanate, which they held responsible for previous defeat and the Turkish decadence. The process was led by Kemal Ataturk (1881.1938), through the National Turkish Movement, and the Republic was officially declared by the end of 1922.
Kemalism and post-Kemalism
Kemalism was a nationalist bourgeois laic movement that built a type of political regime named by Trotsky as Bonapartist “sui generis”. Without breaking the framework of capitalism, the Turkish bourgeoisie resisted the imperialist pressure and disputed a greater economic-political space. It sought to modernize the State’s institutions, its infrastructure, and promoted certain economic development based on strong state intervention. In this framework, it established an alliance with the young USSR, from the Kars/Erevan Treaty (1922), which established the frontiers and definitive peace between Turkey and the Soviet Republics of the South Caucasus (Armenia, Azerbaijan and Georgia).
Kemalism always had the aspiration of Turkey playing a role of “potency of regional influence”. After World War II, it began a “turn towards the West”, in other words, of alliance with imperialist potencies. This included, from 1946, the abandonment of the unique party system (the Kemalist Republican People’s Party) and the institution of a multi-party system with the possibility of “independent” candidates, although several presidents elected by Parliament were of military origin.
In 1952, it entered the NATO (North Atlantic Treaty Organization, a joint military block against the “Soviet Block”). Currently, the NATO possesses bases, intelligence and education headquarters or centers in 14 countries, including the air base Incirlik (under the United States control), which possesses nuclear weapons. In 1962, it entered the OECD (Organization for Economic Co-operation and Development) composed by imperialist countries and a few “trustworthy” nations. From its creation in 1999, it joined the G-20.
The relatively autonomous capitalist economic model, with strong State influence, began to show clear wear symptoms with the economic crisis of the 1970s and the reduction of the international space for these types of models. The Turkish bourgeoisie began a transition towards capitalist “economic liberation”, prevailing during these years. An expression of this was the presidency of the economist Turgut Özal (1989-1993) and his policy of concessions of specific management services of the State to private companies and the privatization of other State enterprises.
Recep Erdogan
The heirs of Kemalism were dispersed into several political forces. When these reached office, they applied adjustment plans and privatizations that undermined the living conditions of the masses. An expression of this was the great emigration towards Germany. Currently, almost three million people who were born in Turkey live in Germany and it is estimated that added to their children born in German territory, they are over six millions.
In this framework, worsened by the 2001 financial crisis, popular opposition grew and the other bourgeois alternative strengthened: the Justice and Development Party (AKP). With an Islamic ideology and led by Recep Erdogan, it won elections by the end of 2002, and it remained in office until now through different alliances. Erdogan pushed two plans for a “regional potency” Turkey. The first was to advance deeply with the privatizations and the stimulation of foreign investments. Only in the first two years, he sold the telecommunications and steel public companies, the liquor factory and the Turkish State airline. Afterwards he even set under concession the rivers, lakes and other sources of water. From the point of view of the bourgeois macro-economy, he did not do poorly: the GDP grew between 2003 and 2007 at 5.8% per year and between 2008 and 2015, at 3.7%. In 2016, it decreased to 3.2%, but in 2017 it took a leap to 7%, although over a Keynesian credit policy and of tax exemptions. Turkey occupied by the end of this year, the 17 position among world economies. From there, there was an “overheating”, as bourgeois economists call it, which set the bases for the current crisis. In the political level, Erdogan posed his political regime as “civilized Islamism”, allied of imperialist countries and capable of playing a pacifier role, a link between Europe and the Muslim countries.
However, things were not so simple at home. Although economic growth provided him a significant electoral support, he had to face the opposition of the different social sectors suffering from the adjustments and privatizations. The opposition of the strong laic sectors against the growing Islamization of the State and the serious issue of oppressed nationalities, particularly the Kurdish, which represent 20% of the country’s population and are widely majoritarian in almost 25% of the Turkish territory.
Erdogan’s answer was to build a political regime that held the parliamentary forms, but became growingly Bonapartist, authoritarian and repressive. This process was accentuated from the defeat of what the Turkish government qualified as a “coup d’état attempt” in July 2016. Erdogan seized this to purge the army and the State cadres, and imprison thousands from the opposition.
Tensions with Imperialism
Although Turkey is an ally of imperialist countries in political, economic and military grounds, the relations with the Erdogan regime have become tenser over the past years.
On one hand, there is the negative answer, almost definitive, to the historical request of the Turkish bourgeoisie to enter the European Union (EU). Among other factors, the EU does not wish to “buy into” the repressive Turkish regime, the serious Kurdish issue, nor the “free pass” throughout Europe for Turkish citizens.
On behalf of the USA, the tension increased from the outburst of the revolutionary process against Assad in Syria, in 2011, its transformation into a civil war, and the autonomy managed by the Kurdish in Rojava. The entire situation became even more complex and dangerous for the USA from the ISIS outbreak. The political-military weakness of imperialism in this region, after its defeat in Iraq and Afghanistan, led the Obama administrations to establish a policy of privileged alliance and military support to the Kurdish Rojava leadership: the PYD (the Democratic Union Party), very close to the PKK (the Kurdistan Workers’ Party) [8]. At the same time, Turkey was displaced as the main ally of imperialism in this region.
This represented an alarm for Erdogan: an extended “armed frontier” with Syria, dominated by an enemy that was also present in its own territory through the PKK. Trump continued and deepened the Obama policy and supported the formation of the FDS, a military force of 50,000 soldiers, mostly Kurdish, which finally defeated the ISIS and broadened the Kurdish domain over Syrian territories towards the southeast of the country. They wanted to strengthen their influence in the framework of the agreement with Putin on the division of Syria into two areas of influence, to the east and the west of the Euphrates River (under the control of Assad, Russia and Iran’s forces).
At this point, since 2016, the Turkish army carried out two invasions on Syrian territory. The first was to stop the Kurdish advance towards the west. The second to oust the Kurdish forced from the Afrin canton, the one more to the west under their domain, located to the west of Euphrates. To dominate this part of the frontier from both sides. Trump let the Turkish attack happen, but he was surely mad that it was not run by him, and even worse, after an agreement of Erdogan with Putin and the Iran regime [9].
Another increase in tension took place because the North American pastor Andrew Brunson was judged and condemned in Turkey accused of “terrorism” and “espionage”. The United States requested his immediate liberation, while the Ancara government requested the extradition of Fethullan Gulen, Turkish preacher exiled for years in the United States, accused by the Turkish government of being the orchestrator of the coup d’état of July 2016 [10].
From the point of view of his political perspective, Trump’s measure “kills two birds with one stone”: on one hand, it is a sign to show Erdogan “who rules in the world”. On the other, it is part of his more general policies of taxing imports of numerous products, which threatens to unleash a “world trade war” [11] and which has already generated strong conflicts with important sectors of North American imperialism with other G-7 governments.
A “Raki Effect”?
Turkey may have been an element of political and economic stability in favor of imperialism. Currently, it is the opposite. In the words of the British magazine, “The Economist”, “There was a time when people believed a democratic and secular Turkey could eventually access the European Union of the rich liberal States, known as the West. There was also a time, a few years back, when Turkey was preferred by investors in emerging markets.” [12]. The current currency crisis is an expression of this, and this situation may have consequences in the struggle of the Turkish class and in unexpected actions of the Turkish government in its foreign policy.
At the same time, this crisis already has an expansive impact and the first signs of a possible “raki effect” in world economy are appearing, particularly in the other “emerging countries” members of the G-20, which are going through a rapid outflow of dollars. The hardest blow was felt by Argentina, with an economic-financial and social explosive situation: in a few days, the peso devaluated over 6% before the dollar, with a loss of 82% in the year, which is devouring the “loan” of 50 billion dollars recently agreed upon with the IMF [13].
It was not the only country of the G-20 that was affected. “In a week, the South African rand and the Russian ruble lost 8% before the dollar, reaching this Monday its lowest level in two years”. The Brazilian real devalued 4%. The “mistrust” extends even to Europe, “The movement of aversion to risk has thrown down currencies of other emergent countries and it became stronger last Friday with the news that the European Central Bank is worried with the exposition of European banks” in these countries [14].
In other words, Trump’s policy, far from “strengthening America” (in other words, North American imperialism) it weakens it because it throws more logs on a fire of a possible “new storm” of the economic crisis open in 2007-2008, and it separates them from what would be their natural allies, growingly weakening what they call “world order”.
[1] Raki is a liquor derived from grape, with an anise-like flavor. It is the traditional alcoholic beverage of Turkey
[7] On this subject see:
[8] Idem.
[9] On this subject see:
[11] On this subject see:
[13] Article previously quoted from “La Nación”.
[14] Article previously quoted from “O Globo”.

Check out our other content

Check out other tags:

Most Popular Articles