Turkey cooks its books, revealing Erdogan's descent into paranoia
Turks woke up on Monday to discover they were $142 billion better off than they thought they were.
It’s true that the economy shrank 1.8% in the third quarter from a year earlier. But that a small setback, considering the discovery that unbeknownst to you, them or Turkey's statisticians, the gross domestic product had grown not just an enviable 4.4% annually over the last five years but at a Chinese-like rate of 7.1%.
Sensible Turks, however, would do well to mourn the news rather than celebrate it.
Fake news is a problem. Squishy statistics issued by the government agencies is an even bigger one, because investors, policy makers and businesses rely on them to make real-world decisions. Government statisticians are supposed to steer clear of politics.
Suspiciously pretty
No one is accusing Turkey of making up the numbers from whole cloth, and governments legitimately overhaul their methods for collecting and analyzing the data they have (Israel did it in 2013).
But the circumstances under which Ankara made the revisions look suspicious.
The revised methodology was only announced the Friday before the figures were released, Bloomberg News reports. Comparative data using the old method was removed from the statistics office website and a bulletin explaining the revised estimate for last year was put up on the site, then quickly taken down.
Indeed, the official figure for growth in 2015 looks especially suspicious: In a year when the country underwent tense election campaigns, the lira plummeted and Turkey was struck by multiple terror attacks, GDP grew not just 4.4%, as the original figure was, but by 6.1%.
The Turkey of President Recep Tayyip Erdogan is authoritarian, intolerant, paranoid and repressive, and has grown more so since the July coup.
Economic policy is no longer about encouraging free markets; it is enforced by threatening businesses and purging government agencies.
Godfather economics
An eye-popping 36,000 Turks have been detained since the coup. The media, the schools and universities and the army have been purged of people alleged to be supporters of the Gulen movement.
The crackdown also encompasses the business sector. Officials at the Finance Ministry, the banking regulator and the Capital Markets Board have been sent packing in such big numbers that there weren’t enough officials around to approve half the scheduled debt and equity sales planned on the stock market in recent months. Close to 500 companies have been taken over by the government and Turkey’s largest corporate law firm was raided and shut down.
Erdogan’s authoritarianism has also kept Turkish interest rates low, even as the lira was going from one new low to the next, because he thinks easy credit will reignite the economy.
Economists and bankers think otherwise, but the president wasn’t going to let that get in his way. Last August, he said bankers who failed to cut rates were guilty of “treason”. later his prime minister, Binali Yildirim, took the Godfather approach to the problem, telling them, “You either do this on your own or we make you do it.” Needless to say, last month the biggest bankers complied.
When all these things failed to stimulate the economy adequately, Ankara proved not to be above a little fiddling of the numbers.
The GDP data-fiddle isn’t the first for the Erdogan government. Earlier this month, the president urged patriotic Turks to sell their dollars and buy lira or gold to help shore up the Turkish currency and help reduce the country’s dangerously high dollar debt.
Lo and behold, the government reported that $10 billion of dollars were exchanged and the lira briefly strengthened. But it turned out it wasn’t loyal Turkish citizens but state institutions that had swapped their dollars for lira.
The sub-text for all this isn’t Islam but just plain paranoia. “We are well-aware of the games that some are trying to play in our country following the July 15 treachery. They are now trying to stage a coup through interest rates, the stock market and foreign exchange movements,” the president said two weeks ago.
Erdogan and his acolytes see enemies around them working to undermine Turkey and bring the downfall of its leader. Turkey’s ailing economy isn’t the consequence of bad policies or simply a breather after so many years of strong growth, it’s a conspiracy. Who these enemies are, isn’t clear – maybe Gulen, the United States, Israel, anyone who opposes the president. Anyhow, who they are really isn’t what’s important. What’s important is that Turkey needs Erdogan to stand up to them. And don’t you forget it.
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