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    The Gezi resistance and the great financial crisis: what’s in common?

    Fatih Özatay, PhD13 June 2013 - Okunma Sayısı: 1217

    During a long period of stability, major elements of instability might pile up slowly.

    Is there anything common between the underlying reasons for the global financial crisis, and the Gezi Park resistance and the peaceful demonstrations in support of it? I have to admit that at first glance the question seems rather “odd” and irrelevant.

    Before the great financial crisis, developed countries enjoyed price stability with radically low inflation rates and growth rates were close to the potential for a significantly long timeframe. That’s why it was called “the Great Stability” era. The world was confident that developed countries had secured macroeconomic stability. The financial crisis erupted despite the favorable outlook in these very countries.

    In Turkey, the ruling government has received almost 50 percent of the votes. It is in power for more than a decade and is expected to win the next election as well. What is more, this same ruling party has taken critical steps to solve the major challenge facing Turkey and stop the bloodshed. Hence, the political mood is calm and stable. Then, a peaceful environmentalist demonstration at the Gezi Park turns into a massive social movement.

    Here lies the main commonality between the processes that lead to the great financial crisis and to the Gezi Park resistance. During a long period of stability, let it be the economic stability before the global crisis or the political stability before the Gezi Park resistance, major elements of instability might slowly pile up.

    Let me ask another question. But before that I have to go over the main lesson economists learned from the great financial crisis: if financial vulnerabilities pile up during periods of presupposed stability, securing price stability and growth around potential is not enough. Macroprudential measures are of equal importance as stability measures.

    Developed countries where the great financial crisis broke out did not cut corner and go blame China, Russia or India. They did not condemn any other country or power. Instead, they reviewed their actions to find out what they did wrong. That’s why central banks and governments have been putting so much emphasis on financial stability lately. All have been trying to find out suitable policies, instruments and institutional structures. If you visit the IMF’s webpage you’ll see in April, they held a meeting with a number of economists including a number of Nobel Laureates. They also are trying to find an answer to the same question.

    So, do you think Turkey will learn a constructive lesson as such? Will politicians, the ruling party and the government in particular, acknowledge that democracy isn’t all about election results and that people want to enjoy their freedoms each and every day of the four-year period between two elections? If they do, Turkey can be a way more beautiful country, where politicians brag about how happy the people are rather than how big the economy is. Needless to say, such climate also brings economic success.

    This commentary was published in Radikal daily on 13.06.2013