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A tale of three blasts
I still recommend taking the long view on Turkey. Yes, there is cause for serious concern, but Turkey remains a great country in a very troubled region. In this troubled region, we do not always do the right thing, but I like to think we learn from our mistakes. Just have a look at the three major events, three blasts, in fact, that I see this week, and three learning opportunities, taking their place in our collective consciousness.
The first one is literally a blast. It happened in Beirut, devastated a large chunk of the beloved city once more and this time at a very inopportune time. When I first visited Beirut around 1995, the first thing that struck me was not only the checkpoints of various factions in the major roads of the city, but also the Hafez Assad pictures all around starting from the airport. There were Syrian soldiers all around. With that relative stability, Beirut rebuilt itself after its bloody civil war and the subsequent Israeli invasion.
It must have been around the year 2000, and I was at a meeting at American University of Beirut (AUB). Turkey had at that time just started on its floating exchange rate regime. “How on earth did you convince your politicians to take such a drastic measure so rapidly?” I was asked. I remember telling them that no politician in their right mind decide rationally to pass from a fixed to a floating exchange rate. There are simply too many vested interests. You just let the markets do it and convince the politicians on the day after. The Lebanese could not make it in the last 20 years. Turkey’s politicians did, then the ballot box wiped them all out and brought the AKP to power. Another instance of Turkey’s difference.
Now that there is a perpetual war stretching from Tehran to Beirut, the city will be more difficult to rebuild. COVID-19 also won’t help, as the global economic slowdown it has caused will cut down the remittances and global aid trickling into Lebanon. These are Turkey’s neighbors, and we have more contact with them than ever before. Turkey now hosts around 4 million refugees from the region’s failed states. In comparison to its neighbors, Turkey is still like an island of stability where ballot box is doing its job.
The second blast this week was economic, and shows us some of the ways Turkey too remains deeply flawed. At a time of a US dollar glut in the markets and every currency is appreciating against the dollar, the Turkish lira entered a week of rapid depreciation. On Tuesday, the day of the Beirut blast, one dollar was worth around 6.93 liras. On Friday, the rate exploded to around 7.30 according to the Central Bank, but has reached 7.50 in the free market.
This is a clear policy mistake, if you ask me, but as far as those go, it is a very uninteresting one. Our currency depreciated more than 4.5 percent in one day, and for the first time in over 19 years, we have had dual exchange rates in a country that still officially has a floating exchange rate regime. We are having a 20th century currency crisis at the end of the first quarter of the 21st. The only thing that is interesting about this is that we don’t seem to be sufficiently embarrassed about it.
I remember the way I used to explain this situation as a young economist 20 years ago, before the floating decision was made: “This interest rate level you now have and this exchange rate level you have here do not belong to the same universe,” I used to say, “if you want keep this exchange rate, you need to raise your interest rate. If you want to have a low interest rate, then you need to let the exchange rate adjust properly. Yet you cannot control both of them at the same time.” If you attempt the uncontrollable, you get an explosion, probably in both the exchange rate and the interest, with inflation the after shock. I have to admit that it is discouraging that we are in need of a refresher when it comes to this lesson.
The third blast of this week was rhetorical. It involves a few male Islamist columnists flinging sexist insults at a new species of the Turkish elite: the powerful and proud headscarved woman. The issue was about whether or not Turkey should leave the İstanbul Convention, which is an international treaty on stopping violence against women and domestic violence. Turkey took the lead in the initiative when it was signed in 2011 (hence the name), but Islamists in Turkey now campaign against the treaty, presenting themselves as defenders of the family and vanquishers of LGBT rights. In their zeal, they have crossed swords with the Women and Democracy Association (KADEM) where Sumeyye Erdogan Bayraktar, the president’s daughter, happens to be on the executive board. They are now getting a lesson in progressive politics.
I believe that this is a historical moment. Beautiful in fact. A diverse set of female guardians of Turkish modernization are united in the fight against domestic violence. Violence against women might be the first genuinely cross-party issue Turkey has seen in years.
We have reached this point with the first big debate. The first big debate in Turkey was over the right of women to attend university lectures with headscarves. In a country with a significant percentage of women with this head cover, banning them was a terrible way of managing an inclusive growth strategy. It only shows how unprepared Turkey’s elite was in managing the country’s transformation process - but “you snooze, you lose” as they say.
On the one side, there are conservative fathers who pay the bill for their daughters to leave their homes and attend a university. They decide to dispatch their daughters to participate in life outside the home. Now they are asking for justice once again. On the other side, there are conservative husbands who have never heard of a woman with a career. They will have to get used to it.
This social explosion by itself shows why Turkey is different and important in this region.