Erdoğan’s anti-populist stance and Turkey’s path

  • 17 Ekim 2018 Çarşamba

Rumor has it that Turkey’s economic policies have been bearing populist traces for some time. On top of this, there has been unsubstantiated propaganda that President Recep Tayyip Erdoğan is supporting populist policies, moving the economy away from market rationality. This endeavor is being undertaken to create a widespread bad perception of Turkish economic policy.

This week, Erdoğan expressed his argument against “early retirement” at the Justice and Development Party’s (AK Party) parliamentary group meeting, emphasizing, “In the past, Turkey greatly suffered from populist policies. So, let us not reawaken this old disease.”

All of the AK Party’s periods in power, including election times, have been far from short-term populist deviations. However, I think we need to discuss and talk about what the president mentions. Indeed, Erdoğan has been far from statist and populist approaches during all periods of power. He has always emphasized the importance of proper market functioning within the framework of its rules. In this sense, his objection to early retirement is coherent and, in my view, the following is the approach that he bases his argument on.

Here is the issue of early retirement in Turkey: Individuals who have fulfilled pension liability and who however cannot retire because of their age ask for the right to retire irrespective of age. As it is known, with increased life expectancy, pension systems and relevant actuarial accounts have been renewed all over the world. Today, northern European countries have regulated their social security legislation in accordance with the new system. How will early retirement, in case it happens, affect labor markets and social welfare, much less the social security system and the budget burden?

A rational government can overlook the public sector undertaking a temporary burden if a practice that can be a burden on public finances (for any time) will raise social welfare and positively contribute to the overall efficiency of the working social sectors in the medium and long run. For instance, the construction of ports and roads that will boost exports in the medium and long term and the construction of energy pipelines that will reduce energy costs are investments of this kind. Likewise, education and health expenditures and, of course, the government’s investments in technology are investments that will make a strong contribution to social welfare in the medium and long term.

Then, let us go back to answer the question asked above: While “early retirement,” irrespective of age, is a burden that the public sector will undertake, could it be a practice that will regulate the labor markets in favor of all employees in the medium and long term and raise social welfare this way? Definitely no.

As a matter of fact, those who start to receive regular and guaranteed early retirement benefits will want to work after retirement and hence subvert wages and new employment balances in labor markets. This is a major problem that will even overshadow the burden of the issue on the social security system. For instance, a 38-year-old “early retiree” will request to work for a lower wage than a new graduate without a burden of pension liability. This is undoubtedly a factor that will reduce initial wages, reduce premium entry in the system and, most importantly, aggravate youth unemployment.

In this sense, young people in particular and increasingly all employees should object to the issue of “early retirement” and warn those who express this unfair demand like a social right.

Let us revisit the place of populism issue in the neoliberal terminology or International Monetary Fund (IMF) jargon. During last week’s Turkey-Africa Business Forum in Istanbul, President Erdoğan stated that whenever Turkey rises and starts to produce and grow, they strive to prevent it with various pressure and sanctions; they assassinate the economy and oppose investments. This is exactly the case. The jargon of the IMF and rating agencies formulates this situation as a “populist” deviation.

For such institutions, all public investments that will boost the efficiency of a developing country are considered populist policies. Improving all areas of productivity, except labor productivity, can be considered populism. In other words, imperial countries, which are at the helm of the system, can make public investments that will use technology rent. If others make such investments, it is considered populism. This is why the highest public debt in proportion to GDP in the world today is in developed countries.

In developed countries, the government undertakes the development of high technology through defense industry technology and supports the private sector and research and development activities. This is because, any capital holder, regardless of how strong they are, cannot make initial investments in these areas. In developed countries, the banking system, along with the government, supports high technology investments which will bring return in for decades. The government makes the first capital accumulation in the leading sectors and transfers it to the private sector in due time. The private sector in pioneering control industries is intertwined with the government and works with substantial government advance loans, especially in the U.S.

Turkey has started to do this starting from the defense industry. Under the Erdoğan administration, Turkey has long been making – and will continue to make – investments that will push up overall economic efficiency, infrastructure projects, exports, industry and general welfare and that will enhance the global competitiveness of enterprises with models both from inside and outside of the budget.

In this sense, this is obviously not populism. It is precisely the beginning of a local and national economy and a development path. There is no room for populism in Turkey’s economic policies, and a welfare-oriented market economy will gain further importance from now on.