As the value of the Turkish Lira plummets, President Recep Tayyip Erdoğan reportedly said at the meeting of the Central Executive Board (MYK) that he is modeling the Turkish economy on that of China, which provides cheap labor and production to global companies. Economists interviewed by Deutsche Welle Turkish doubt this will work.
The lira has lost more than 45% of its value since the beginning of the year – at the beginning of January, it was valued at just over 7.2 lira to the dollar. Now it stands at 13.7, largely as a result of repeated interest rate cuts by the central bank, directed by President Erdoğan.
Inflation is also at record highs – the state-run Turkish Statistical Institute (TÜİK) says that inflation is 21.31%, year over year, but experts fear it is much higher. According to data released on Dec. 5 by the Istanbul Planning Agency, the cost of living in Istanbul, Turkey’s largest city, for example, has increased on average by more than 50% in the last year.
Despite this unprecedented economic crisis, President Erdoğan has dug his heels in on low-interest rates, claiming that he is fighting a “war of economic independence.” He says that a decrease in the FX value of the lira will increase foreign investment in the country, thereby spurring production, exports, and employment in the country. However, economists say this is unfounded in economic theory.
Now, it is reported that Erdoğan said it would model itself on the cheap labor and production-centered economy of China. Economists speaking to DW Turkish said that because the population structure, management style, and educational culture in China are completely different than those in Turkey, it is unlikely to work.
According to Prof. Murat Birdal from Istanbul University’s Faculty of Economics says that the premise of succeeding on the back of cheap labor is a faulty one – it is a “race to the bottom,” he says. Foreign investment in the country may grow – as it has in India and China, two economies Erdoğan has emulated – while the poor labor force gets increasingly poor.
“Countries are trying to capture a bigger share of world trade by lowering wages, but ultimately the population is getting poorer,” Birdal said.
Birdal further emphasized that this economic model could bring with it authoritarian governance and economic system similar to that of China, where freedom of speech and expression are both severely repressed and dissent harshly punished.
“These models can only be applied under authoritarian regimes,” Birdal said, “They create an environment far from democracy, where labor is not organized and no one gets their due. The population is rapidly impoverished.”
The promotion of this economic model, then, implies the promotion of a political system that would even further strengthen the authoritarian and anti-human rights and egalitarian tendencies of the current government.
“You can’t implement a model that will impoverish 90% of the population within a democratic system,” he said.
Economist Arda Tunca says that beyond these managerial issues, there is the problem of human resources. Turkey – excluding its refugee population – lacks a large, inexpensive workforce. Therefore, he said, it seems that the government is planning to use the country’s large Syrian and Afghan refugee populations, who are generally willing to work for less than Turkish laborers, to fuel this plan. However, the issue is, as he points out, that these workers are already working for less than minimum wage.
“You, as the state, cannot provide social security to these people. However, you see them as human resources,” Tunca said.
Birdal says this model prioritizes foreign investment over the welfare of the people. The wealth of a few, he says, is increased at the expense of the many.
“This model does not offer welfare to the population of the country. On the contrary, it is fed by the poverty of the country’s population. It is impossible for this to provide an increase in welfare for Turkey in the medium or long term. It does not match reality,” he said.