Turkish lira: buying less and less by the day

Inflation and pauperisation

Inflation is soaring, along with chauvinist rhetoric. Things are not looking good for Erdoğan and Erdoğanomics, reports Esen Uslu

According to Marx, “The more extensive ... the industrial reserve army, the greater is official pauperism. This is the absolute general law of capitalist accumulation.”1 That is certainly the case in Turkey right now.

According to the Turkish Statistical Institute (TSI), consumer prices rose 2.98% in May. This represents an annual inflation of 73.5% - the highest since rate since 1998. For the same period Reuters calculated the monthly inflation rate as 4.8%, which means an annual rate of 76.5%. Meanwhile the team at the official state Anatolian Agency calculated an annual rate of 5.8%!

The figures of the discredited TSI are now nothing but crude propaganda aimed at the captive domestic audience. During the last four years four directors have been appointed to the TSI tasked with putting president Recep Tayyip Erdoğan’s spin on the numbers. The internal pressure became so unbearable that seven members of the committee announcing the monthly figures took leave of absence just before the figures were released. Many technical staff resigned. The situation became so shambolic that soon the European Union may stop accepting TSI data as reliable - as it did once for the Greece’s statistical institution during its economic meltdown.

The most reliable data was provided by the Inflation Research Group, an independent body of economists, which calculated the monthly rate at 5.5% and annual rate at 160.8%.

These are horrendous statistics; even the TSI’s doctored figures are heralding very difficult living conditions for working people, pensioners, students - and, of course, the unemployed. There are 20.8 million wage earners and 13.6 million pensioners in Turkey. The minimum wage, which is practically the median wage in the private sector, and pensions are calculated on the basis of the TSI’s figures.

So doctoring the figures enables Erdoğan to corner a large number of people by dangling the carrot of rising minimum wages, pensions and student grants, while using the stick of religiosity, militarism and nationalism on their backside.

As the economy goes down the drain, anti-Kurdish, anti-Arabic, anti-Iranian, anti-Greek and anti-western rhetoric is rising to fever pitch. While the militarist and bureaucratic state is itself the core reason for rising inflation and the economic downturn, the growing prowess and posture of the armed forces, and the brinkmanship, conquest, invasion and annexation of northern Syria and Iraq are presented as major successes that make the unbearable bearable.

On top of the May figures, a 40% hike on natural gas and energy prices was announced at the beginning of this month. The Producer Price Index is rising more sharply than the Consumer Price Index, indicating that inflation would continue to accelerate in the coming months.

Since September 2021, the Turkish lira has lost half of its value. There was an attempt to prop it up by selling massive amounts of foreign currency, but currency reserves were so depleted that the government resorted to borrowing heavily through deals with Gulf countries, and the foreign currencies obtained through those deals are being sold.

In Turkey those lucky enough to have savings try to protect their value in the face of rampant inflation by buying foreign currency or real estate. Consequently house prices and rents have risen sharply. Soon ordinary working families will not be able to afford living in cities. The prices of a woefully inadequate public transport system have also risen so sharply that workplaces situated around the metropolitan centres are now providing buses to bring people to and from work.

Interest rates

This situation is primarily the result of the Erdoğan government’s deliberate policy of maintaining growth despite inflation, based on the forlorn hope that, if it succeeds in doing so until the next general election, due in June 2023, then the ‘prosperity’ created - ie, new jobs, the illusion of an increased minimum wage, cheap mortgages to rejuvenate the sagging construction industry, an export drive and increased tourism revenues, etc - would be sufficient to win another term in office for Erdoğan’s Justice and Development Party. And, inshallah (god willing), the economy will improve, as in the major capitalist countries.

The motto, ‘Higher interest rates are not the result of inflation, but its cause’, has been put into practice rigorously since the last change of staff in economic administration. Despite the highest inflation rate for half a century, the Central Bank’s interest rate is kept at 14%.

This policy is receiving criticism from left, right and centre, but is still maintained doggedly. The finance minister, Nureddin Nebati, openly declared this in a recent speech, when he said: “At the crossroads we switched track. We have chosen growing together with inflation … In this system companies and exporters are increasing their earnings; only low income-earners are suffering.”

That much plain speaking was, of course, not to the liking of Erdoğan, who released a statement of correction, saying that policies to improve the lot of low income-earners are also being undertaken. And Erdoğan in his wisdom added that there is no inflation - just a high cost of living.

Even the head of the employers’ association, TUSIAD, felt obliged to speak against this in his recent speech at a gathering promoting investment in Turkey: “The paradigm shift started with the monetary policy of the principal central banks and fighting inflation became the primary objective. If need be, growth could be sacrificed to achieve that.”

The growing popular discontent is yet to create a great impetus for change, and any display of popular opposition is brutally suppressed. The state with its security apparatus, together with the bureaucracy, judiciary and armed forces, are standing behind the government and dutifully carrying out such acts of suppression as required. In fact the lawlessness of the state is beyond belief. Since the military junta of 1980, the aim has been to create a single, unified administration under a popular figure supported by a veil of religiosity and nationalism, and prepared to go to any length to crush any trace of opposition.

And now, with all those aspects seemingly in place, Turkey is poised to conquer more land in Syria. It is just looking for the green light from the US and Russia to go ahead with plans to put an end to the Rojava conflict by capturing Manbij, Tel Rifaat and Kobane from the Kurds. At present the official position of both powers is negative, but Turkey is very keen to make use of any crack that may appear during the Ukraine war. The recent opportunity to use Turkey’s veto against the Nato membership of Sweden and Finland was designed to create yet another bargaining chip to try to persuade Russian and/or the US to shift their positions.

However, unexpected popular opposition against increasing prices has flared up in occupied northern Syria. With Turkey posed to attempt yet another ‘holy conquest’, the people of Afrin and Jindires rose up against the price hikes imposed by the Turkish-owned electricity company. The Turkish-trained and -equipped police force killed one of the protestors. Within a couple of days Mare’, Bab al-Salameh, Azez and Akhtarin also became hot spots of protest.

Quickly the mood turned ugly, with the chants of “Syria is a free country!” and “Turks out!” It was a sobering smack in the face for imperial dreams. But the Turkish lira was made the de facto currency of the occupied zones, and health clinics as well as housing were built to win hearts and minds. But the economic collapse made clear that only brute force and bribery remains to suppress the jihadis and control the occupied zones.

A similar situation exists in northern Cyprus. Individual ministers and even governments are routinely replaced in an attempt to maintain loyalty. And an ongoing assault operation on the northern Iraqi territory is going on with almost daily air strikes, killing tens of people every day.

  1. K Marx Capital Vol 1, chapter 25: www.marxists.org/archive/marx/works/1867-c1/ch25.htm.↩︎