How soon will the economy recover? Unfortunately, the answer to this question is not promising. If what we understand by economy is narrowly defined as inflation, growth and current account deficit, then with the proper economic policy, the economy can recover in 2 to 3 years (by recovery, I mean inflation and growth reaching 5 percent and the current account deficit falling below 3 percent).
However, the right economic policy is not a condition to be taken lightly. If we take into account the promises made during the election process, the expenditures made, the burden of the currency-protected deposit scheme, the situation of the public institutions in the sovereign wealth fund, the extremely heavy burden brought about by the earthquake, the rapid increase in the budget deficit, and the negative expectations, we can imagine how difficult it will be to implement an economic policy to recover the situation.
In addition to these, the size of the economic wreckage is likely to be beyond our imagination. We should not underestimate the burdens we do not know about because they have not been disclosed, or the extent to which the announced data do not reflect the truth.
When we take into account this wreckage, we can see that the right economic policy will not bring results by increasing interest rates by only a few points, or by providing 3 – 5 billion dollars of external funds. Unfortunately, it will require sacrifice from all segments of society again.
Turkey is considered one of the most risky countries in the world by foreign investors. Even those who would lend money are hesitant despite the 10 percent interest rate in dollars.
We are literally faced with a dilemma: Either we will go through a period of severe austerity or we will not be able to pick up the wreckage.
This is the situation as I see it.
If you ask how those who are in power and those who aspire to power can make such lavish promises despite the current situation, I would like to quote Thomas Sowell:
“The first lesson of economics is scarcity: There is never enough to satisfy everyone. The first lesson of politics is to disregard the first lesson of economics.”
If we think a little more broadly about economics—for example if we look at agriculture and animal husbandry—we can see that our work is cut out for us. In both areas, Turkey has regressed in the last two decades. The record increases in the prices of meat, milk, eggs, and foodstuffs are not only due to rising costs and demand. These undoubtedly have a big impact, but the real issue is that farmers have started to abandon production due to ill-advised policies. I estimate that it will take at least ten years for agriculture and animal husbandry to recover and be able to meet the country’s needs.
It will also take years for the rule of law to be restored and for the judicial system to be put back in place. This is no easy task for a system that is accustomed to working under the direction of a single political power.
It will also be difficult for the bureaucracy to adjust—it has been destroyed after two decades of subordination to a political party. Experienced bureaucrats have left as a result, and so it will be difficult to train and guide new entrants in order to build a functioning bureaucracy.
Education has gotten so bad in this period that we have university graduates who study engineering but do not know mathematics, who study economics but cannot define the subject, who think astronomy is astrology. And these children think they are engineers, economists and astronomers. Then, when they settle for a job as a clerk in a store, their dreams are shattered and they are are filled with disappointment.
There are high school graduates who cannot add and subtract, who have never heard of Dostoevsky, who think India is farther than the moon. I think it will take no less than twenty years for our educational system to recover.
Meanwhile, the isolation that has been cultivated in foreign policy is unbelievable. On the road to a visa-free Europe, we are unable to travel abroad even with a visa. Even green passports are no longer accepted. Turkey has no friends except Azerbaijan, Russia and a few Gulf countries with which it has relations that most of us do not know the extent of. Our international reputation has never been at such a low level.
To summarize, if all we had to do was reduce inflation and recover the current account deficit, it would not be difficult to get out of this. In the past, we have come out of such crises in a year or two. This time, however, the framework surrounding the economy is worse than the economy.
And without fixing both completely, it will not be possible to make the economic recovery permanent. If it were possible, the recovery between 2003 and 2010 would have been permanent and we would not be facing this wreckage today.
Some will undoubtedly accuse me of pessimism. This is always the case. Whenever I present the facts, I am characterized as a pessimist. But this is not pessimism—this is all a breakdown of the facts.
If we set out knowing these and take our measures accordingly, however, we may find a way out.
This article was originally published in Mr. Eğilmez’s blog and translated by FTP.
The views and opinions expressed above are the author’s and do not represent those of the Free Turkish Press.