As Turkey Implodes

The few media outlets that are covering Turkey are focusing on the corruption scandals and the political theatrics. As noted yesterday, they deserve credit for reporting on the failed American policy in Turkey.

But, that’s not even the most important thing that’s happening in turkey. David Goldman, aka Spengler is altering us to the fact that the country is in the midst of an economic collapse.

Goldman has been predicting this outcome for some time now and he deserves credit for an excellent call. For the record he was well ahead of everyone else in his analysis of the situation in Egypt, too.

In a column today Goldman explains that Turkey is in the midst of  a political and economic implosion:

Turkey is coming apart. The Islamist coalition that crushed the secular military and political establishment–between Tayip Erdogan’s ruling AK Party and the Islamist movement around Fethullah Gulen–has cracked. The Gulenists, who predominate in the security forces, have arrested the sons of top government ministers for helping Iran to launder money and circumvent sanctions, and ten members of Erdogan’s cabinet have resigned. Turkey’s currency is in free fall, and that’s just the beginning of the country’s troubles: about two-fifths of corporate debt is in foreign currencies, so the cost of servicing it jumps whenever the Turkish lira declines. Turkish stocks have crashed (and were down another 5% in dollar terms in early trading Friday). So much for Turkey’s miracle economy.

Why does this matter? The Obama administration, and also the Bush administration, pinned their hopes on Erdogan. They believed that he would serve as the example of an Islamist leader who could direct an advanced economy.

For some time it looked as though Erdogan’s Turkey was a great economic success. Unfortunately, Goldman analyzes, the Turkish economic miracle was smoke and mirrors:

Erdogan’s much-vaunted economic miracle stemmed mainly from vast credit expansion to fuel an import boom, leaving the country with a current account deficit of 7 % of GDP (about the same as Greece before it went bankrupt) and a mushrooming pile of short-term foreign debt. The Gulf States kept financing Erdogan’s import bill, evidently because they wanted to keep a Sunni power in business as a counterweight to Iran; perhaps they have tired of Turkey’s double-dealing with the Persians. And credulous investors kept piling into Turkish stocks.

Why was it inevitable that Turkey implode?

In Goldman’s words:

Turkey is a mediocre economy at best with a poorly-educated workforce, no high tech capacity, and shrinking markets in depressed Europe and the unstable Arab world. Its future might well be as an economic tributary of China, as the “New Silk Road” extends high-speed rail lines to the Bosporus.

For the past ten years we have heard ad nauseum about the “Turkish model” of “Muslim democracy.” The George W. Bush administration courted Erdogan even before he became prime minister, and Obama went out of his way to make Erdogan his principal pal in foreign policy. I have been ridiculing this notion for years, for example in this 2010 essay for Tablet.

The whole notion was flawed from top to bottom. Turkey was not in line to become an economic power of any kind: it lacked the people and skills to do anything better than medium-tech manufacturing. Its Islamists never were democrats.

If Turkey cannot serve as a role model for the floundering states in the Middle East, what nation can?

You guessed it: Israel.

One understands why political leaders staked so much hope on the Turkish miracle. They knew that most of the region’s Muslims would rather die than emulate the Jewish state.

Thus, Goldman sees little cause for optimism:

Now the hashish smoke has cleared, Erdogan’s Cave of Wonders has turned back into a sandpit, and the foreign policy establishment has nothing to show for years of propitiation of this Anatolian wannabe except a headache.

Now that Turkey is coming unstuck, along with Libya, Egypt, Lebanon, Syria, and Iraq, we should conclude that the entire project of bringing stability to the Muslim world was a hookah-dream to begin with. Except for the State of Israel and a couple of Sunni monarchies that survive by dint of their oil wealth, we are witnessing the unraveling of the Middle East. The best we can do is to insulate ourselves from the spillover effect.