We need to answer the following question in order to correctly express the Turkey-U.S. crisis: Can the U.S. offensive policy toward Turkey and the entire world, in violation of World Trade Organization (WTO) rules, be explained with the impasse Donald Trump is experiencing in domestic politics?
Today, it is being discussed that Trump will either be pushed to resign like former President Richard Nixon or will be discharged. Numerous articles are being written that a legal process, which will even overshadow the Watergate scandal that toppled Nixon, is lying ahead of Trump. Even if these are not exaggerated comments, I think the current U.S. offensive policy is independent of Trump and his domestic policy impasse.
What matters is the fact that the system has come to the end of the U.S.-built road and the way out for this is the total rejection of the economic paradigm that the U.S. has imposed on the whole world especially since the 1970s.
The dollar-related financial shocks experienced by Turkey and many other countries for a long time have made it compulsory for everyone to seek new solutions.
First of all, the removal of the dollar from financial circulation and global trade as the general equivalent is an important agenda not only for nations but also for commercial and financial unions, like BRICS (Brazil, Russia, India, China and South Africa).
This was the most important item on the agenda of the recent BRICS meeting in Johannesburg that was also attended by Turkey. In fact, as a result of declining U.S. power and the countries from the Asia-Pacific beginning to fill this gap, countries have long discussed trade in their own local currencies. Today, BRICS countries alone have reached half of the global reserves. Making an International Monetary Fund (IMF)-like BRICS development bank functional and Turkey’s involvement here will shake the foundation of the dollar-based monetary system.
The share of the U.S. dollar in global reserves has been on the decline, especially over the past decade. This is mainly because countries that are experiencing the “dollar crisis” have tended toward using local currencies in the trade of basic commodities, especially energy, and are making currency swap agreements. In this sense, the recent economic attack experienced by Turkey has been an important warning not only for Turkey but also for the entire world, and the BRICS countries in particular.
As a matter of fact, “trade in local currencies and currency swap agreements,” reiterated by President Recep Tayyip Erdoğan on all occasions in recent years, and the new regulatory participation banks to be created under BRICS-like structures have bitterly rocked the agenda as a substitute for the Bretton-Woods institutions (the IMF and the World Bank). The Chinese yuan becoming a basic reserve currency soon is an expected major development. For me, Trump must leave aside his obsession with Turkey and put this issue on the table. However, since he is in quite a bit of trouble himself, I do not think he will be able to think so strategically for his nation.
From now on, Turkey will be one of the central countries in the quest for a new global currency system. I think that this quest must be internalized as an official political path in both our foreign policy and domestic economic policies.
In this sense, we must further improve our economic and commercial relations with the European Union and others. While doing this, however, we must also build corporate structures that will lay the foundations for a new trade and currency system. Within this framework, Turkey will develop more realistic, corporate and future-oriented relationships with the EU and the U.K. (in the context of the Brexit process). In the meantime, Turkey will also create permanent economic and political unions to its east, starting with Russia, and join existing ones. It must be acknowledged that with this crisis (read “with the Trump administration”) the Atlantic alliance and absolute U.S. hegemony have become a thing of the past. Trump has inevitably put an end to this – which is something good.
In addition, we are also leaving behind the petrodollar system that the U.S. created in the early 1970s and the price-setting role of the Organization of the Petroleum Exporting Countries (OPEC). The end of the petrodollar system will accelerate the end of the dollar-based currency system. Turkey’s leading role as an energy hub and addressing energy pricing and payment systems with a new approach will also be important.
Apart from all this, the last attack has led us to see our shortcomings in more detail and told us how great the timing of the transition to the presidential system was. Today, fragmentation in the management of the Turkish economy has largely disappeared. Perhaps for the first time, we have the opportunity to synchronize all the political initiatives and paths on the economy’s main road, especially the harmony of monetary and fiscal policies.
We now know that our basic problems such as inflation and current account deficit cannot be solved independently of unemployment, income distribution inequality and their causes.
We also know that we must make our resources available for dynamic, globally competitive and technology-producing realistic entrepreneurs, who have turned innovation into corporate policy. We must inevitably encourage them to reach appropriate scale. However, we also have learned that monopolistic and rent-seeking structures must get off the back of the economy.
In this context, it is evident what we must do in order to achieve basic macro objectives and attain sustainable growth-development which can create employment and regulate income distribution. Further strengthening the depth and openness of the financial system, nourishing the economy not only through the banking system, but also through capital markets, reducing investment costs in terms of both maturity and rate, diversifying resources, rebuilding financial openness in a multidimensional way and allocating more qualified resources to export-oriented sectors of high-value-added and high technology efficiency must be the first items of the manifest of new development path that will emerge while dressing the wounds of the latest attack.
By the way, we think that those who have written unfair reports about Turkey will be very soon ashamed of what they have written.
Turkey has been practicing a floating exchange rate regime and will not abandon it. So, what is going on is not a currency war and we are not faced with a currency-related debt crisis. If we were applying a fixed or a semi-floating exchange rate regime like before the 2001 crisis and if short-term foreign exchange liabilities were irrecoverable in this case, then we would begin the sentence with the definition of “exchange rate crisis.”
On the other hand, Turkey is ahead of many developed countries in terms of budget performance, external debt/GDP and capital adequacy of the banking system.
Credit rating agencies or market analysts that start reports with a statement that “Turkey has a debt problem emanating from a currency crisis,” which goes beyond a lie and is a completely wrong economic definition, must at least stop deceiving their clients even if they cannot be honest for themselves.
It is no secret that many European banks survive thanks to their operations and investments in Turkey and that they are bankrupt in their home countries. That is why we are in a period where everyone has to pay attention to what they write.