FOR THOSE TURKS old enough to re-
member the 1990s, when the economy
was stalked by triple-digit inflation and
Main Street banks traded trash can liners
full of Turkish lira in the back streets of Is-
tanbul’s Grand Bazaar, the country’s cur-
rent economic woes may seem more like
a return to the good-old, bad-old days.
Yet, for the generations who have
grown up under the increasingly watchful
eye of President Recep Tayyip Erdogan
and his Justice and Development Party
(AKP) government, the events of the last
few weeks undoubtedly have come as
much more of a shock.
Those used to years of sustained eco-
nomic growth, single-digit annual infla-
tion and a growing and visible prosperity,
were all the more stunned by the sudden
plummeting of the country’s currency in
early August.
In the first half of the month, the Turk-
ish lira lost 20 percent of its value; since
the start of the year it has fallen 40 per-
cent. Meanwhile, inflation has spiked
and the cost of borrowing has skyrocketed, as Turkish bonds
have been reclassified as “junk” and international ratings
agencies have issued a salvo of downgrades.
The crisis—which is some way from over yet—has also
caused shakiness in other emerging markets, as well as for
European banks with significant Turkish exposure.
Yet, while all this has been a long time in coming—and the
subject of repeated warnings by Turkish and international
economists and business leaders—the fallout for President
Erdogan has been limited to date.
In managing so far to dodge this bullet, the president—
whose rejection of economic orthodoxy likely contributed to
much of the crisis—has demonstrated not only his consider-
able skills as a politician, but also his possession of that other
key quality in a successful leader: luck.
For, in the middle of all these woes, Erdogan was likely
saved from major political damage by the intervention of an-
other president—Donald Trump.Indeed, the U.S. leader’s taking up of the cause of Ameri-
can pastor Andrew Brunson, imprisoned in Turkey after being
accused of aiding various terrorist groups, and Trump’s impo-
sition of economic sanctions on Turkey, have helped Erdogan
cover years of economic mismanagement under some
swirling Turkish and Islamic flags.
At a rally in early August, he urged supporters to take their
dollars out from under the pillow and “immediately give these
to the banks and convert to Turkish lira.” He also cast this
highly dubious strategy as “a war of independence and the fu-
ture,” while later adding that attacks on the economy were like
“attacks on our call to prayer and our flag.”
While few Turks—other than the least economically savvy of
AKP loyalists—will have traded any of their precious hard cur-
rency as a result of Erdogan’s call, the warning was clear
enough: holding the president responsible for the crisis is un-
patriotic, anti-Islamic and treasonous.
Instead, according to the AKP mantra endlessly repeated in
the largely AKP-controlled media, “nothing is fundamentally
wrong” with the economy. The only problem is this unprovokedAmerchantwaitsforcustomersoutsidehisIstanbulshop,Aug.16,2018.TheTurkishlirahit
arecordlowonAug.13,tradingat7.2362totheU.S.dollar,followingPresidentDonald
Trump’simpositionoftariffsagainstafellowNATOmember.AftertheTurkishfinanceminister
pledgedthenextdaytofixthecurrencycrisis,thelirareboundedtotradeat6.53tothedollar.
Bymid-August,thelirahadlostmorethan40percentofitsvalueagainstthedollarthisyear.CHRIS MCGRATH/GETTY IMAGESJonathan Gorvett is a free-lance writer based in Istanbul.OCTOBER2018 WASHINGTON REPORT ON MIDDLE EAST AFFAIRS 47Turkey’s Economic Crisis
By Jonathan Gorvett
Special Report
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