The Rise of Authoritarianism and the Currency Crisis in Turkey
Turkey has been experiencing increasing authoritarianism under President Recep Tayyip Erdoğan, with its roots traced back to the 2013 Gezi Protests. However, it was after the failed coup attempt in 2016 that Erdoğan started to reshape the country and its political institutions. His quest to become a modern sultan has slowly ruined the economy. In this article, I want to summarize the increasing authoritarianism in Turkey since the coup attempt and the resulting currency crisis.
Increasing Authoritarianism
Following the failed coup attempt in 2016, Erdoğan initially expressed remorse for his role in facilitating the infiltration of Gülen cultists into the government. This infiltration was part of a larger campaign spanning several decades. But Erdoğan’s need for manpower, as he sought to replace the political establishment in government bureaucracy, presented an opportunity for Gülen to take advantage. Erdoğan viewed Gülen’s organization as a harmless religious group, similar to himself, who was pushed to the political fringes by the secular establishment. But he was not aware of how big of a mistake this was until he fell out with Gülen. Gülen’s main goal was to take over the Armed Forces, and although the job was not complete at the time of the strife between Erdoğan and Gülen, Gülen had enough presence to make a push to grab the power before his followers were removed from the military.
Erdoğan was shaken by the coup attempt as he barely made it out alive and found out that Gülen had several of his followers working closely with him. While he initially expressed remorse for his role and apologized for being deceived, Erdoğan quickly turned back to his pragmatic self and began a witch hunt to purge the cultists from government positions. Although many agreed with the need for a purge to prosecute Gülen followers for being part of a terrorist organization with plans to take over the government, Erdoğan turned it into a witch hunt that resulted in the investigation of nearly 2 million people, the arrest of around 350 thousand people, and the jailing of approximately 100 thousand people. While the witch hunt did target Gülen followers, it soon became clear that Erdoğan was taking advantage of the situation to undermine the social opposition to him. He began to throw accusations loosely against people who were in opposition to him, and while this strategy worked for a little while, society eventually caught up, and support for the purge gradually died down in the face of mounting injustice. Erdoğan’s extensive propaganda to integrate the coup into the country’s foundational events failed only after a few years.
Erdoğan noticed that the coup attempt offered a unique opportunity to achieve what he wanted for years: to move the country from a parliamentary to a presidential system. Because he has been continuously in power since 2002, he already has few checks from the bureaucracy and government institutions due to his extensive appointments over the years. Except for the Constitutional Court and the Armed Forces, he basically controls the entire government. However, strongman leaders don’t want to be prime ministers, they want to be presidents. He capitalized on the rally around the flag effect and held a referendum, winning it with 51.4% of the votes. In the new system, he has even fewer checks on him than before.
Erdoğan always disliked criticism but had to endure it. The level of authoritarianism Erdoğan was able to reach following the coup attempt made the next step easier. He began suing people who insulted him, which over time, extended to cover some basic criticisms on Twitter or YouTube if it gained traction online. In 2022 alone, he sued around 17 thousand people, including a 13-year-old child. The judicial process has been heavily politicized to facilitate him by loyal prosecutors, who twisted and stretched the laws to get convictions. Although the cases often eventually fail to go past the Constitutional Court and the European Court of Human Rights, they still serve a function. In addition to the fear of persecution, it is of little consolation to eventually prove your innocence if you need to spend money and years of your life fighting the system. Out of all appeals, the Constitutional Court found the judiciary system in violation against the people 95% of the time, which shows how politicized the judicial system is.
The Currency Crisis
The increasing authoritarianism in Turkey has had a negative impact on the country’s economy. As foreign investment gradually left, the Turkish Lira constantly lost value, leading to an ongoing currency crisis. In late 2013, 1 USD was worth 2 Turkish Liras, but as the crisis deepened, it hit 7 Liras during the pandemic. Erdoğan has promised to bring the crisis under control, but after multiple failed attempts, confidence in the Lira and his government is at an all-time low. People have switched to US Dollars, Euros, and gold to preserve the value of their money, which has only increased pressure on the currency exchange rates.
By the end of 2020, 1 USD reached around 7.30 Liras, and by the end of 2021, it was around 13.30 Liras, showing a significant decrease in value. The government implemented two solutions to address the shortage of foreign exchanges. The first solution was for banks to offer a new type of Turkish Lira account, but it was a desperate move that pressured businesses to sell their dollar reserves and switch to this new account type. The second solution was to get temporary relief from other authoritarian countries, such as Russia, Saudi Arabia, and the UAE, which preferred having Erdoğan as Turkey’s president. Despite these solutions, the USD rate reached 18.70 Liras by the end of 2022.
The loans provided by Saudi Arabia and the UAE demonstrate the extent of Turkey’s economic distress, especially since President Erdoğan is vehemently opposed to the regimes in these countries. In 2018, when the US and EU countries showed disinterest in holding MBS accountable for the Khashoggi murder, Erdoğan persisted in pursuing the case and presented evidence to the world, openly targeting the Saudi government. However, as the currency crisis worsened, Erdoğan agreed to transfer the murder case to Saudi Arabia in exchange for a 5 billion USD debt. Erdoğan made a similar deal with the UAE, a country he had accused of supporting the 2016 coup attempt. Improving relations with the UAE and silencing mob boss Sedat Peker, who had fled to the country after exposing significant corruption in Turkey, were key incentives for Erdoğan. Before his silencing, Peker had threatened to reveal more corruption ahead of the upcoming elections.
Erdoğan wanted to keep the USD rate at 19 TL before the elections, but it has recently increased to 19.50, and economists comment that the fact that Erdoğan is unable to keep the rate at his preferred level shows how desperate the situation is. Furthermore, the market price of the USD increased to 20.50. The Lira is currently overvalued due to constant USD sales by the Central Bank. The economy is already in terrible shape despite the masked foreign exchange rates which can only get worse once the Central Bank stops selling its borrowed assets. JP Morgan predicts that USD will jump up to 25 Liras if the opposition wins, and 30 Liras if Erdoğan wins. Either way, there will be massive inflation in the short term resulting from the exchange rate jump and the country will have little to no ability to contain further increases without substantial foreign investment. Erdoğan’s former economy minister and now in opposition to him, DEVA Party leader Ali Babacan claims that the Central Bank now sold reserves worth over 250 billion USD by now and currently has a net deficit of 69 billion USD.
We are heading to the elections on May 14 under these circumstances. You can read my post here to learn more about the upcoming elections in Turkey.
