13 September 2011

The Downside of Turkey's Regional Ascent

My initial motivation for starting this blog was to dispel some erroneous notions about the Arab Spring. Consequently, almost without realizing, I ended up writing more than I wanted to about the Middle East in general and Turkey's new regional role in particular.

Lately, I noticed that, while trying to argue how the mainstream narrative does not explain the regional realities, I might have given the impression that I view Turkey's regional power status positively. That is a misleading impression. I believe that Turkey's actions will be beneficial in stabilizing the region and solving two of its long-running problems. But I seriously doubt that Turkey will benefit from these actions in the long run.

Let's take a look at the overall picture.

Economically, Turkey is doing very well. In the first quarter of 2011, with 11 percent growth, it had the highest growth rate in the world, ahead of both China and Argentina. Its growth was also impressive in 2009 and 2010 despite a major global crisis: it managed to increase its exports (getting very close to the $100 billion mark).

One of the reasons for this performance is the exponentially expanding inflows of foreign capital.
Foreign direct capital in the first four months of the year totaled $6 billion, while $1.77 billion exited the economy in the same period. More than $4.32 billion of the capital that entered Turkey in the period went toward “activities of financial intermediary institutions,” while $536 million involved the energy sector.
A large percentage of this influx comes from the EU countries, as Turkey represents a unique combination of advantages for them: it is integrated into the EU Customs Union but it does not have to abide by EU's environmental and social rules.

But the current trend is towards getting cash and investment capital from wealthy Gulf countries who are looking for a safe place to park their huge sums. As Euro is increasingly shaky and the US seems like a hostile place for Muslim assets, they view Turkey as a safe harbor.

Perhaps more importantly, Saudi Arabia, who sees itself as the patron saint of Sunnis in the region (and in the world) began to think of Turkey as an indispensable ally. Since the only way Saudis can influence world affairs is via cash this is what they are doing:
Saudi Arabia foresees investment of $600 billion in Turkey during the next 20 years, according to Abdul Kareem Abu al Nasr, the chairman of National Commercial Bank, the biggest Saudi lender. 
But if I were the Turkish government I would not rejoice.

All of this influx of capital enables them to hide or neglect three serious structural problems. One is high unemployment (officially around 12 percent but analysts believe it to be much higher than that), the other is a persistent current account deficit (and all this incoming cash makes that situation bearable for now) and the third one is where that money is going.

Currently, most of the foreign capital goes to finance and construction and to a lesser degree to the energy sector. In other words, when they exit, as they inevitably will at some point in the future, they will not leave behind a series of booming productive industries and a healthy economy. Instead, when the current financial and real estate bubbles burst they will expose a society with high unemployment and sharp income inequality.

In that sense, Turkey is like a mini version of the US. Like the US, it attracts capital mostly because of its power status. That capital allows it to grow and perform well while hiding problem areas in its economy. When that cheap money flow stops (and begins to exit) things will be quite hard for Turkey.

Instead of saving for those days and finding ways to correct those structural problems, Turkey is spending its money on giant construction projects (like the proposed $100 billion canal that will run parallel to Bosphorus) and on projecting an image of regional superpower.

Politically, doing the bidding of the US in the region and getting all these economic benefits for it seems like a good bet for the government. And it is. Based mostly on these economic benefits, the ruling party (AKP) managed to increase its share of the popular votes in three consecutive elections and last time a few months ago, it got the support of 50 percent of the electorate.

The situation also enables Erdogan to cast himself as the new Sultan of the region. He grants Syria assistance and new trade relations one day, tells Assad to get going the next day. He visits Middle Eastern countries with a large entourage, signs deals, grants requests and acts like an inspirational leader. He offers to pay for the formation of a new government in Libya. He goes to Somalia to bring humanitarian aid.

Perhaps as a result of all this, by now, there are growing signs that he thinks he can do no wrong. After all, the US is behind him, the Muslim world looks up to him, he won his fight with the Turkish military and put them in their barracks once and for all and he has the support of a large majority of his country.

But precisely those same attributes are also pushing him towards an increasingly less democratic and more autocratic posture. According to the IPI, Turkey is the world leader in imprisoned journalists, ahead of China and Iran. Most of the media outlets are either in the hands of his supporters or too afraid to criticize the government.

His party is moving in the only area it did not dominate previously and that is the judiciary. Last year's constitutional amendment gave his government the power to appoint Supreme Court judges. The Ministry of Justice has been successfully pushing to shut down corruption trials against AKP politicians (including the PM) while pursuing an ever widening investigation against opposition figures. The so-called Ergenekon trial is used as a pretext to incarcerate hundreds of intellectuals, journalists and dissidents. The deliberately slow moving trial implies that even if a majority of these people are eventually acquitted (which is likely), they will have served long prison sentences. The dissuasive message for future dissidents cannot be clearer.

Another issue is the ideological polarization and decay. High unemployment and sharp income disparity usually accompanies ideological polarization (just look at the US). In the Turkish case, the mutual enmity of the two sides borders on hatred. Daily political discourse has become so irrational that, if fact X previously believed by side A is stated by side B, side A promptly disowns that fact and their previously held belief so that they don't have to give credit to side B for stating a true fact. Kinda like American conservatives turning against their previously held beliefs like climate change and greenhouse effect, only because liberals champion these issues now.

By far, the most dangerous aspect of the current ideological climate (and the neo-ottoman delusions of grandeur) is the rise of nationalism on both side. Nationalism runs through both the religious and the secularist sides. According to Pew Global Attitude survey, Turkey became the most anti-American country in the world during the last decade, with 91 percent (in 2007) expressing a negative opinion of the US. That's just 9 percent who had a positive view of the US.

The secularist nationalists believe that the US and Israel want to break up the country and form a giant Kurdistan next door. The religious nationalists believe that the US and Israel are conspiring to undermine Islam and to block the ascent of Muslims. Both of these views are expressed incessantly in the partisan media and chain mails containing explicit hate messages find millions of in-boxes on the Internet.

If you noticed the pairing of the US and Israel, you might have guessed that the high anti-Americanism is now matched by rampant antisemitism. Casual observers might assume that in a predominantly Muslim country, antisemitism should not be considered unusual. But in this case, it should be seen as unusual. As I noted before, Turkey was one of the six countries to recognize the State of Israel in 1948. It has always had solid relations with Israel and they signed as late as in 1996 several military cooperation agreements. The two countries are each other's largest trading partner in the region (excluding oil). And Turks never had a history of hostility towards Jews and while there are a few shameful and tragic episodes during WWII, in general, Turkish Jews were never associated with any kind of Dolchstosslegende.

Consequently, even though I believe the tension between Turkey and Israel is a kabuki theater, I am deeply concerned about its implications at the societal level.

In short, it seems to me that, the same conditions that make Turkey a regional superpower and a very important actor in solving two thorny Middle Eastern problems, could also spell disaster in the long term.

What is needed is a less polarizing leadership, capable of bridging the ideological gap, fix the structural problems of the economy, reduce unemployment and tone down the populist, nationalist and anti-Israeli rhetoric of AKP rank-and-file.

But I doubt that the current leadership is capable of that.

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