To put it mildly, the Turkish economy is in dire straits. Instead of negotiating a fair share of newly found oil and gas reserves in the Aegean Sea with Cyprus and Greece, Turkish President Recep Tayyip Erdogan has opted for pseudo-nationalistic saber-rattling that drives away would-be investors. Pictured: Erdogan speaks in Mersin, standing in front of the Abdulhamid Han gas exploration ship, on August 9, 2022. (Photo by Adem ALTAN / AFP) (Photo by ADEM ALTAN/AFP via Getty Images)
It was almost exactly 20 years ago when Kemal Dervis told a group of reporters in Ankara that in "in 20 years", Turkey would be one of Europe's two biggest economies alongside Germany.
Shortly after that remark, however, Dervis's brief tenure as Turkey's "economic miracle worker" in Prime Minister Bulent Ecevit's government was over. Dervis was not to become Turkey's Ludwig Erhard, the man who shaped West Germany's postwar economic revival, and Ecevit himself soon took his own curtain call.
Yet, at the time Dervis's prediction didn't sound too outlandish.
The radical reforms started under Prime Minister and President Turgut Ozal were given a wider scope helping to curb runaway inflation and attracting the largest inflow of direct foreign investment in Turkish history. The corruption that had gangrened the state-dominated rentier economy was also brought under control, while Dervis's clever measures saved the banking system from collapse.
So, why is Turkey today, with a per capita Gross Domestic Product (GDP) approximately one-third that of Spain, still in the lower league in Europe?
Today Turkey is returning to the nightmarish inflation that it had sacrificed so much to control. The national currency, the lira, which had stabilized after long yo-yo periods, is once again on a downward slope. For the third year running, Turkey's trade deficit is expanding at an unprecedented rate while unemployment is also rising at rates unknown since the 1990s.
To put it mildly, the Turkish economy is in dire straits; a fact that a walk in Istanbul streets reveals with shops having no or few customers, hotels that report fewer reservations, more and more people riding bicycles because they cannot afford to fill their cars with petrol, and crowds of job-seekers moving around parks and bazaars. The latest estimates from the Central Bank show that the average personal debt is above 110 percent of annual income.
Some causes of the current crisis are conjectural. Turkey depends on energy imports at a time when oil and gas prices are shooting up. Erhard's economic miracle in Germany happened when oil was priced at $2.70 per barrel, the equivalent of $32 in current terms. Today, Turkey faces prices well above $100.
At the same time, Turkey, unlike "emerging" economies like Brazil, has few exportable natural resources. Still accounting for 25% of GDP, Turkey's agriculture has been facing growing problems in European markets because of stiffer regulations and the chill in relations with Brussels. When it comes to exports of manufactured goods, the "dumping strategy" adopted under President Recep Tayyip Erdogan's leadership, means that Turkish consumers pay a higher price than foreign buyers to cover the cost of state subsidies. That in turn adds to inflationary pressure.
Worse still, part of the earnings from industrial exports is lodged in foreign banks at a time that the flow of foreign direct investment is getting thinner. With the global Covid crisis now in its third year, Turkey has also lost a good part of its income from foreign tourism. In many places in the country now, most of the foreign tourists are low-spending Russians trying to get away from the impact of the Ukraine war.
In the past four years, foreign investment, much of it from oil-rich Arab countries, Iran and Russia, has been directed at real estate projects that create bubbles like the ones that pushed Spain to the brink in the 1980s.
Interestingly, the Turkish diaspora, estimated to be around 12 million, is cutting back remittances and investing less in the old homeland. The grim economic prospects have encouraged emigration, especially by better-educated and more skilled workers who needed for new technology-based industries. This compounds the problems created by the fall in national research and development budgets to just above 1% of the GDP compared, to almost 4% in West Germany when Erhard was in charge of the economy.
However, the current crisis may also have deeper political reasons. In his wanton quest for faux-grandeur, Erdogan has embarked on an adventurous and costly foreign policy. He has wasted a lot of money trying to get a seat at the top table in Libya, with zilch for a result.
Another costly chimera got Turkey involved in the Transcaucasian conflict, again with no benefit to the Turkish economy. Despite Ankara's massive support in the war against Armenia, Azerbaijan isn't even ready to sell oil to Turkey with the same discounts that Russia and Iran offer.
Instead of negotiating a fair share of newly found oil and gas reserves in the Aegean Sea with Cyprus and Greece, Erdogan has opted for pseudo-nationalistic saber-rattling that drives away would-be investors.
Erdogan has also got Turkey involved in glory-chasing but costly gesticulations in Kosovo, North Macedonia, Bosnia-Herzegovina, and Albania, not forgetting the decades-long involvement in occupied Northern Cyprus, which has proved to be both an increasingly costly and an increasingly ugly mistress for the pashas. Another ugly but expensive mistress is the Muslim Brotherhood (Ikhwan al-Moslemeen).
Erdogan brought it under Turkish thumb at the cost of damaging ties with Qatar and by bribing the Egyptian and Tunisian leftovers of the Brotherhood leadership.
Taking over the Brotherhood was supposed to complete Erdogan's victory over the Fethullah Gulen movement, leaving " the Sultan" as the unchallenged aspirant for the leadership of political Islam in and around the Mediterranean.
But that is not all. Erdogan has expanded the war that Turkey has waged against Kurds for almost half a century to parts of Iraq and Syria. For the past five years, he has been trying to carve out a Turkish glacis in northern Syria's largely Kurdish region. Turkish experts believe that the adventure is costing around $10 billion a year, almost twice what Ankara gets from Brussels to keep Syrian refugees away from the EU dreamland.
Erdogan's obsession with getting chunks of Syria and Iraq has prevented Turkey from playing a constructive role in stabilizing its two neighbors one way or another. Meanwhile, corruption at all levels is returning with a vengeance, reminding many Turks of the late 1990s when Ankara was dubbed a den of thieves.
Erdogan apologists claim that he has put himself "at the center" of the new geostrategic "big game". Turkey, they say, remains a member of NATO but also a respected interlocutor for Russia. It can talk to the mullahs in Tehran and the mandarins in Beijing. Erdogan can also sell drones to Russians and Ukrainians to kill each other.
Well, maybe. But anyone who tries to sit between two, not to say several, chairs risks ending up between chairs right on the floor.
Amir Taheri was the executive editor-in-chief of the daily Kayhan in Iran from 1972 to 1979. He has worked at or written for innumerable publications, published eleven books, and has been a columnist for Asharq Al-Awsat since 1987.
This article was originally published by Asharq al-Awsat and is reprinted by kind permission of the author.