Some of you might say that both of our arms were already cut off before this probe. I have to say it is an argument to consider.

Remember the analogy Sokollu Mehmed Pasha, first the grand admiral and later the grand vizier, was reported to have mentioned to the Venetian Ambassador: “By conquering Cyprus we have cut off one of your arms; at Lepanto by defeating our navy you have only shaved off our beard. However, you know that a cut-off arm cannot be replaced but shaved-off beard grows thicker.” I got this quote when I searched some few keywords left in my mind from the “thorough” history classes I took in secondary school. I think this is more or less the original quote reported from the chronicles.

We have come to hear an argument a lot lately, mainly from officials: due to the latest corruption probe, the value of the quoted companies has decreased by millions of dollars. The implicit or explicit message here is that the groundless accusations cause publicly quoted companies record great losses and eventually harm the Turkish economy. It is the responsibility of the judiciary to decide whether or not the accusations are correct. As an economist, I want to assess corporate losses from the “shaved-off-beard” perspective. Later I will touch upon the “cut-off-arm” angle.

The shaved-off-beard perspective: say that the stocks market has dived and the shares of companies have slumped. Have you seen any stock market that declines and remains there for good? There is no doubt that the stock indices and the value of companies will eventually increase back at some point. At the end of the day, this does not have a major effect on the macroeconomic performance. Only the investors who have to sell the shares in between the ups and downs make losses as share prices decrease. Those who purchase the shares at low prices, on the other hand, make profits as the stocks market will increase back. One’s gain, one’s loss. The end effect will be nil. Of course theoretically, a fall in stocks market would affect consumption and investment negatively. But this holds rather for advanced economies where stocks have a remarkable share in consumer wealth and companies finance new investments by issuing stocks. Turkey is not such country. So, if we neglect the investors who had to sell shares, the decline in the stocks market at the furthest be the shaved off beard.

The cut-off-arm perspective: what we have at hand nowadays is a cut off arm, not a shaved off beard. A good reputation is hard-won and easily lost. It is even worse when we are talking about the reputation of a country. The allegations are severe and the people involved in the allegations have not resigned yet. Whether or not it is a plot against the government, the people involved should resign for the sake of the investigation, right? How does democracy function in Turkey?

Some of you might say that both of our arms were already cut off before this probe. I have to say it is an argument to consider. Many young people were killed or injured during the Gezi protests. And before that? Journalists behind bars, people arrested for months just for hanging banners, long detention periods…

This commentary was published in Radikal daily on 24.12.2013