There’s a scene in the film ‘Whoops Apocalypse’ where Peter Cook, playing the part of Prime Minister, hosts a cabinet meeting and explains the root cause of the unprecedented levels of unemployment afflicting the country. To the patent consternation of his colleagues, he tells them record joblessness has been caused by ‘pixies’ but not the ‘innocent ones sitting on toadstools playing a whistle but the nasty, malevolent, green ones with black, pointed beards’.
It makes for funny viewing but it can’t be anywhere as hilarious as when the President of Turkey, Recep Tayip Erdogan, a next-millennial sultan, assembles the various lickspittle invertebrates who comprise his cabinet and patiently elaborates his homespun theories about inflation and interest rates. Do they nod sagely or are they rolling in the aisles when he relates this sidesplittingly hoary old chestnut? Most likely, the answer is he does not care. It’s the way he tells 'em.
I once approached a respected economist from developed markets just to verify that somewhere out there on the wilder shores of economic thought, there wasn’t an experimental school somewhere, led by some batty professor, which postulated that higher inflation warranted lower interest rates to contain it. After all, there is no hypothesis out there so outlandish that no one will subscribe to it at all. He looked at me as though I were a moron (he might have been onto something there), shook his head and went back to studying real economics. I felt lowered in his estimation and reassured him it wasn’t me expounding loony doctrine; just the ‘democratically-elected’ leader of a country with a population of eighty million people and the second-largest army in Nato.
Last weekend’s fiasco surrounding the dismissal of the central bank governor demonstrated beyond doubt that Turkey has already assumed the essential characteristics of a dictatorship. Naci Agbal was fired by presidential decree and the incoming governor was probably as surprised by his appointment as we were. Sahap Kavcioglu’s only qualification for the role would appear to be the slack-jawed expression familiar to most AKP politicians and the densely compacted toothbrush moustache he sports, a feature which has evolved to tickle the presidential derriere when genuflecting behind it.
The decision apparently met with no resistance from the cabinet and in fact if this assortment of sycophantic apple-polishers was replaced with a flat-pack IKEA chipboard cabinet – requiring some self-assembly – it would have made little difference to proceedings. A cabinet reshuffle is scheduled this week to replace the yes-men with other yes-men because Erdogan is a man who often won’t take ‘yes’ for an answer. These aren’t the last days in the bunker. Sadly, the position of his chief adviser (if ‘Yes, Boss’ constitutes advice), the monolithically stupid Yigit Bulut, seems secure. The name Yigit is a Turkish corruption of the Irish phrase, ‘Yer eejit’, and is most apt in this instance. I’m a disciple of nominative determinism and I think it’s especially telling that the literal translation of Sahap Kavcioglu is ‘Falling Star, Son of a Kindling Vendor’. The star is not so much falling as plummeting and it’s the CBRT reserves most likely to go up in flames.
It’s difficult to read Erdogan’s physiognomy. The eyebrows are permanently knitted, implying a general confusion with events, like a man in the supermarket who’s forgotten the shopping list. The eyes suggest a bovine vacancy, the expression costive. The jutting jaw, though, bespeaks a mulish obstinacy and if a personality is best defined as a holding front for a series of psychological disorders competing for pre-eminence then this is the trait which looks best positioned to break free.
Key to understanding Erdogan is establishing whether he really is so cynical that he will impose his madcap economic theories on his nation, knowing them to be ruinous, or whether he is so imbecilic as to believe they are actually applicable. I’m no economist (you’ve only got to look at my mortgage to see that) but his monetary policies – let’s disregard all the others for the time being – have the sophistication of a medieval peasant rolling round in the mud.
From a Turk’s perspective, it’s difficult to know which is preferable and it may be moot anyway, because it seems fair to say, there is no suffering through which he is not prepared to put his country to ensure his political survival. Even a particularly amnesiac goldfish would not have been surprised by the reaction of markets to the sacking of a governor doing his level best to restore some shreds of credibility and revalidate inflation-fighting credentials of a badly degraded institution. It’s not as though it hasn’t happened before. About half a dozen times. The transmission mechanism for inflation through the exchange rate is instantaneous. Fool me once…
Simply hoping for the Turkish lira to be ousted democratically or glide gracefully into retirement will not be rewarding. For every Gadaffi, dragged out of a sewer and sodomised with a bayonet long before retirement age, there is a Mugabe who clung tenaciously power until the age of 96, when he could no longer stay awake. For every Trump or Zuma forced from office through sheer incompetence or crass corruption, there is a Putin who will govern sempiternally. For Erdogan, the struggle to stay in office is existential. Out of office and deprived of immunity from prosecution he would join all his former political opponents in prison. Erdogan has mastered the post-truth politics of polarisation to remain in power and has applied all the totalitarian techniques to win elections in a perfect simulacrum of democracy. It’s the Putin playbook.
Turkey’s net reserves are effectively zero. Albayrak pissed them up the wall. What reserves they do have appear to be borrowed. I cannot explain that concept even if you pay me. The Sovereign Wealth Fund is no such thing and mortgaged up to the hilt. Erdogan is setting much store by a tourism season in 2021 bringing in $30bn of hard currency to shore up the current account. I don’t know about you; I may be going out of my mind this summer but I’m unlikely to be going out of the country. The lira is at a millennial low in real terms. Sanctions are Damoclean. Analysts no longer bother modelling the currency. They know the general direction and pick a big figure en route.
Turkey’s options are limited: it must either approach the IMF for a humiliating bailout, tighten fast and hard, let the currency go or impose capital controls. The problem is Erdogan won’t accept any of those. An idiot does not change his spots. The Great Man Theory of history persuades me that Turkey is destined to remain hostage to his tyrannical whim and ricochet from crisis to crisis. It is doomed to repeat the errors of the past. It will remain an investment pariah and strictly verboten to many blue-chip funds. The best argument in favour of Turkey these days is no one owns it but that only takes you so far, and it’s never far enough.
Putting things in perspective, perhaps we should not expect too much. Throughout its Ottoman history, Turkey was rarely viable economically. It was, famously, the Sick Man of Europe. Now the Sick Man in Turkey is keeping them out of Europe. Since the creation of the Turkish Republic a century ago, more often than not Turkey has experienced huge volatility and been paralysed by inflation and chronic economic instability. The politics were no better. It has lurched from one crisis to another like a drunk hitting furniture on the way to bed. In fact, the boom times of the mid-noughties when Erdogan came to power and everyone (even me) never had it so good were the anomaly in the roughly half a millennium since the fall of Constantinople. A crisis by its very definition must be temporary. If it persists, it’s no longer a crisis. It’s a fact.