People seem to think that Turkey has changed in some basic way in the past couple of years, that the system of 80 million people somehow shifted its stance overnight to no longer be an integral part of the Western civilization. Well, it’s nonsense. Turkey’s is an integral part of western civilization, and its balance of payments is its anchor. Let me be more specific here: its current account deficit links Turkey to the West. So Turkey is deeply integrated with the West, and it will continue to be so despite mounting uncertainty.
Why? First of all, Turkey’s economic link to Europe is irreplaceable. More than 50 percent of our exports go to European markets. In all our other export destinations – the Middle East, Asia and Africa – political factors override the economic. That vital economic link to Europe meant that Turkey went through the acquis convergence machine. That machine is now stalling, which has led to confusion abroad. We won’t always admit it to ourselves, but I think we enjoyed the change machine of the EU. We will miss it if it should ever leave.
Secondly, Turkey has a declining domestic savings base and a growing current account deficit. That is a big structural problem, and unfortunately part and parcel of Turkish psyche. Turkey has always had a current account deficit of 4 to 5% to its GDP. As with any debtor, we are tied to the source of our borrowed money, which traditionally has been in the West. That is how European countries wrung concessions out of the Ottoman Empire during its latter years. The building of the Ottoman Bank – a British-French joint venture – is still one the most impressive structures of Istanbul’s Galata district.
But the Ottoman Bank has long been obsolete, while Turkey keeps racking up its debt. How? That brings me to my third point for today. Up until the end of the Cold War, international fund flows were between governments. That was a direct political link between Turkey and the West. After 1980, global financial markets took over the flow of funds. Does that mean that delinquency is more permissible now? Not at all.
Countries still need to play well with others to remain an integral part of the system. Establish domestic financial markets. Create private channels for fund inflows. Go through financial liberalization. That is what Turkey did in the 1980s. In the past, you could do whatever you wanted to inside your country, and the world would not care as long as you paid your debts. The international economy was a collection of black boxes connected by thin threads. In our world of global financial markets, you need to weave yourself a place in a web of economic, social and political connections. You need to make sure that when crisis strikes, people will come around and help repair your corner of the web, because the whole thing will fall apart if they don’t.
Has Turkey changed? Yes, it has definitely changed. In the 1980s, our GDP per capita was around $1,500. Now it is more than $10,000, boosted by a rapidly growing middle class. We have adjusted to the changes in the world system, but our structural problems linger on. The trouble is that the world appears to be more complex and more uncertain, and the price of our structural problems are increasing.
So yes, maybe Turkey does give an indecisive impression lately. But what country does not? The web of relations that is our globalized world is not an easy environment for states to navigate. “Let the person among you who is without sin be the first to throw a stone to her” (John, 8:7).
This commentary was published in Hürriyet Daily News on 10.01.2015
