National Neoliberalism in Turkey

National Neoliberalism in Turkey

If progressive critics of neoliberalism aim to recuperate the national arena to regain policy space back from global capital, they also need to think hard about how to challenge capitalists they face at home.

Recep Tayyip Erdoğan at Chatham House in May 2018 (Cem Oksuz/Anadolu Agency/Getty Images)

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In the summer of 2013, Istanbul’s Gezi Park became the site of a historic mobilization against the Justice and Development Party (AKP) government. Prompted by plans to privatize and commodify one of the last vestiges of truly public space in downtown Istanbul, protests spread across the country, with approximately 3.6 million people participating. The protesters coalesced around rejecting the AKP’s authoritarianism, but the demonstrations also underscored growing popular discontent with neoliberalism in a country once considered a model for “emerging” economies. The protesters demanded the right to the city, protection of workers’ rights, equal access to healthcare and education, and an end to the “pillaging of [Turkey’s] ecological heritage.” In response, officials portrayed the mobilization as a nefarious international plot to hinder Turkey’s economic growth. Once a champion of deepening the country’s integration into the world market, the AKP government was now vilifying global market forces as a threat to Turkey’s “national will.”

Back in 2009, then–Prime Minister Recep Tayyip Erdoğan launched a charm offensive in front of a Chatham House audience, explaining the regulatory priorities of the AKP government: “If you prepare that environment, [money] will flow to you, and if you fail to do that, then it will turn its direction and go somewhere else. This is why we were determined to provide the right environment.” Erdoğan boasted that “[t]he state is no longer involved in investments or economic activity,” saying any state assets “we have in our hands, we are selling.” A decade after Erdoğan’s endorsement of market rule, in February 2019, the site of the Gezi Park protest in Taksim Square was host to one of fifty government “regulatory retail points” in Istanbul providing affordable food for consumers hit by the highest food inflation in twenty years. Sharp price increases represented the latest economic blow to a country already beset by a major currency and debt crisis that fully materialized in 2018. Forced to take swift action, with local elections coming up in March, the minister of treasury and finance reassured the public with a decisive tone: “We will take necessary measures. Our citizens will see that any problem could be resolved if the state steps in.” The state did step in, and President Erdoğan portrayed the government-backed retail points as an attempt to save “the nation from profiteers and market brokers.” He also lamented the environmental impact of capitalism on the Turkish coastlines, and at election rallies recounted a number of recent large public investment and infrastructure projects.

It is tempting to interpret these changes as a retreat from neoliberalism. But as serious observers have long recognized, state power is essential to bolstering and reproducing that project. There is another way to read Turkey’s recent trajectory. Rather than a harbinger of a post-neoliberal turn, it is an example of a broader trend on both the left and the right: the return of the “nation,” after almost four decades in exile, as the ideal space for managing capitalism.

National Economies to the Rescue

Over a decade after the economic crisis of 2007–8, a wide range of policies have been proposed in the Global North that ostensibly challenge neoliberal globalization. Many of these proposals understandably focus on the “global” part of the equation. As Quinn Slobodian, editor of this Dissent special section, writes in his book Globalists, “the perpetual threat of crisis, the flight of investment that punishes expansion in social policy, and speculative attacks on currencies in reaction to increases in government spending” are key disciplinary elements of “the neoliberal vision of world order.”

This conception of neoliberalism-as-world-order continues to shape political alternatives on the left. From the alter-globalization movement of the 1990s and early 2000s to the Pink Tide governments in Latin America, the critique of a global economic system that forestalls progressive policies at the national level has fueled social movements and party politics. The same sentiments underpin the UK Labour Party’s recent “Build it in Britain” industrial strategy, which invokes what Graham Harrison calls “productionist nationalism.”

Few have more systematically articulated this critique of globalization from the left than German sociologist Wolfgang Streeck. His recent work focuses on how unbridled capital mobility has weakened social cohesion and diminished the space for democratic politics. But he also argues that capital has another lever to increase pressure on “local” workers: the international movement of workers and the heavily regulated integration of refugees into the Western European labor market. Or as he regrettably put it, “[i]mmigration policy camouflaged as asylum and refugee policy.” Both capital and labor mobility, in Streeck’s vision, threaten popular sovereignty. Earlier this year, Streeck went even further and linked “cultural homogeneity” to the “egalitarian values and social cohesion” necessary to reverse the tides of debt-fueled financialization and deregulation.

Similar currents of discontent are also powering politics on the right. In the aftermath of the global economic crisis, the widespread welfare-chauvinist attitudes embodied by nativist right-wing parties in Europe have been coupled with fiery denunciations of bank bailouts in the eurozone, all in the name of giving economic control back to particular groups of people ostensibly defined by their citizenship in national territories.

The thread that connects left and right responses to the economic turmoil of neoliberal globalization is not a retreat back to the state per se, but the recovery of the “nation” as an economic category—as the ideal institutional setting for the productive management of capitalism and the distribution of the benefits of economic growth.

Perhaps the most influential justification for nation-oriented development was provided by Friedrich List, who, as Joseph Schumpeter noted, became a “national hero” in Germany for his advocacy of the Zollverein, “the embryo of German national unity.” List’s The National System of Political Economy, published in 1841, challenged the established tenets of liberal political economy and offered a template for developing countries to play catch-up through industrialization and (partial) protectionism. In a world defined by unequal power relations, List argued, economic development could not be left to the devices of the international market, but had to be advanced by the state. In particular, it was the nation-state that had to protect infant industries in developing countries:

It is the task of politics to civilise the barbarous nationalities, to make the small and weak ones great and strong, but, above all, to secure to them existence and continuance. It is the task of national economy to accomplish the economical development of the nation, and to prepare it for admission into the universal society of the future.

As Karl Marx elaborated in his unfinished critique of Listian national economy, this project’s main aim was in fact not “the economical development of the nation” but of the national bourgeoisie. The concept of “national economy” was a convenient alibi to hide their true objective. For the rapidly developing German bourgeoisie, national economy was a tool to “exploit [their] fellow countrymen, indeed exploit them even more than they were exploited from abroad.”

That critique has not prevented List’s framework from finding receptive audiences in policy circles in the Global South. Listian blueprints have been incorporated into development scholarship by a wide range of economists and social scientists. The concrete applications of the theory have validated the crux of Marx’s critique: industrial development through national economy heavily relied on labor exploitation. Twentieth-century development programs in what Atul Kohli has called “cohesive-capitalist states”—such as South Korea, Brazil, Turkey, and Mexico—were marked by repressive state apparatuses and the severe disciplining of the working classes.

Recalling the authoritarian legacy of national economy is crucial for the present moment. From the Green New Deal to Lexit, contemporary political proposals with social democratic or even socialist aspirations owe a significant debt to a Listian conception of developing and managing capitalism. We need not dismiss the transformative potential of current left movements and the politics they promote, but we must highlight the risks of couching progressive economic restructuring projects within a national–territorial framework.

Capitalism, even at its most globalized, has always been rooted in domestic class forces and the state. A potential confinement of capitalism within national borders is unlikely to produce a fairer or better-regulated economy as long as the same class forces responsible for neoliberal globalization command a disproportionate share of economic power within national borders. Moreover, those who call for a return to nationally managed capitalism often assume that, under the right stewardship, states would almost automatically assume a more progressive posture. This is understandable after decades of attacks on the state’s redistributive role. But an uncritical attitude toward state power risks propping up the increasingly authoritarian tendencies of crisis-stricken states in the Global North and South alike.

The State of the Nation

The experience of Turkey under the AKP provides an object lesson in how policies anchored in both international and national circuits of capital can advance similar class interests—and how the state manages the conflicts exacerbated by those policies at the expense of the working classes.

In 2002, when the recently formed AKP took office after a dramatic electoral triumph, it promised a no-nonsense approach to Turkey’s chronic economic and democratic crises. While many party insiders were already established figures in Turkish politics, the AKP represented itself as marshalling in a new era defined not by old battles along ideological divisions, but by the rule of experts adopting common-sense policies. As two scholars wrote shortly after the elections in the Journal of Democracy, “Turkey has finally elected a single-party government that strongly believes in economic reform, basically respects the IMF framework, and wants full-fledged EU membership.”

Erdoğan’s first government drafted an economic agenda that was closely tied to IMF and World Bank recommendations. While the party’s program named democratization and economic liberalization as its main objectives, it was the latter that successive AKP governments pursued relentlessly, often through limiting the institutional and political space for democratic demands, participation, and accountability. Almost immediately after assuming office, the government set its sights on reforming the public sector, overhauling a floundering privatization program, and forcefully instituting labor-market flexibilization. These priorities were part of a broader macroeconomic plan that prioritized a contractionary monetary policy and fiscal austerity. Almost every aspect of this program relied on securing sustained capital flows into Turkey.

Despite the party’s veneer of novelty, the AKP’s economic program did not differ much from its antecedents. After the 1980 military coup, Turkey became a laboratory of neoliberal experiments. Liberalization defined government policy from that point forward, barring some limited reversals secured by social democratic coalition partners in the 1990s. In many ways, the first AKP government adopted and expanded the scope of macroeconomic reforms designed by the preceding coalition government, including an IMF-backed disinflation program and austerity measures to address a current account deficit that stood at $9.8 billion in 2000.

Two major factors allowed the AKP government to sidestep the political and economic crises that paralyzed its predecessors. Thanks to its parliamentary majority, the AKP did not have to contend with difficult coalition partners—coalition governments were the norm throughout the 1990s—and did not face significant parliamentary challenges from weak opposition parties. Perhaps more important, the government benefited from a remarkably favorable international context, marked by positive relations with the EU and the United States as well as the availability of cheap credit. The party made it clear that Turkey wanted to reclaim its spot as a top investment destination. Global capital heard the call loud and clear. In the first fifteen years of AKP rule, Turkey received $193 billion of foreign direct investment, primarily in finance, manufacturing, and energy. Between 2004 and 2013, the government sold off state assets worth more than $35 billion, placing Turkey in the OECD’s “Privatization Top-10” list. By 2017, the number of companies with foreign capital operating in the country stood at 58,400—a 942 percent increase from 2002.

The remarkable internationalization of the Turkish economy propped up government-friendly “conservative” businesses, most of which were affiliated with MÜSİAD (Independent Industrialists and Businessmen Association) and TUSKON (Turkish Confederation of Businessmen and Industrialists). Hitherto provincial fractions of capital mostly located in Anatolia—and long overshadowed by their well-established industrial and financial counterparts represented by TÜSİAD (Turkish Industry and Business Association)—gained access to new sources of investment and integrated themselves into global production networks. This integration was mirrored by the growing presence of Turkish firms abroad, particularly in the Middle East and Central Asia.

The expansion of the industrial and financial bourgeoisie was further bolstered by their ability to capture lucrative public contracts, the distribution of which played a key role in the restructuring of the state’s public provision under AKP rule. For example, the state regulated and participated in the booming housing market with its repurposed Housing Development Administration (TOKİ). TOKİ’s public tenders became a considerable source of revenue for contractors. According to one estimate, 60 percent of the procurements distributed by TOKİ’s investment arm between 2002 and 2007 were given to MÜSİAD members. By 2016, construction and its affiliated sectors’ share in GDP reached 30 percent. Opposition to desultory urbanization exacerbated by this construction boom became one of the linchpins of the Gezi Park protests.

As with similar “emerging” economies at the time, the initial phase of this neoliberal transformation up to 2007 produced high growth, leading some commentators and academics to compare Turkey’s performance with the BRICS. Yet economic growth and its distributional effects were highly uneven, and improvements in income equality and employment figures have largely reversed in the last decade. Successive AKP governments played a key role in these regressions. Through wide-ranging legal reforms, the government enshrined insecure, informal, and flexible contracts in law, while simultaneously limiting employers’ contractual obligations to workers. In a period of “jobless growth,” wage stagnation, and job precarity, household indebtedness skyrocketed. By 2012, consumer debt amounted to 18.7 percent of GDP. Significant labor mobilizations, such as a seventy-eight-day occupation organized by workers of the privatized tobacco monopoly TEKEL in 2010, were met with an intransigent and often violent state response.

From 2011 onward, the government’s emphasis on the international anchors of this development strategy took a back seat. A combination of internal and external developments—ranging from the U.S. Federal Reserve’s announcement that it was raising interest rates and the gradual devaluation of the Turkish Lira to the political fallout of the Gezi Park protests and the collapse of the government’s “Kurdish Opening”—propelled a pivot back to the “nation.” Largely driven by an effort to retain its appeal to its domestic base and lure nationalist voters from the far right, AKP officials started lambasting anti-Turkish conspiracies purportedly concocted by international financial institutions, credit rating agencies, and a nebulous “interest rate lobby.”

During this period, the AKP began to put more energy into championing the interests of Turkey’s export-oriented commercial and industrial bourgeoisie through generous subsidies, tax exemptions, credit arrangements, and block grants, while helping to facilitate Turkish exporters’ integration into the global market. In 2016 and 2017 alone, Turkey’s export industries received more than 3 billion TL ($500 million) in state subsidies. However, the government simultaneously maintained its commitment to the recommendations of the Investment Advisory Council, which comprises representatives of transnational corporations, the World Bank, and the IMF, and promoted its initiatives to negotiate “a new generation of comprehensive . . . free trade agreements.” In 2017, Erdoğan appealed to international investors directly, underscoring that Turkey was still a “safe harbor” for investment.

As the devaluation of the Lira continued at a breakneck pace and inflation reached a peak of 25 percent in 2018, the government ratcheted up its efforts to protect the national economy while stopping short of radical measures like capital controls. While many companies, including energy firms, construction companies, and food producers, had to restructure their debt with private banks, the state continued assisting these industries, as it did with credit support of 255 billion TL (roughly $45 billion) for half a million companies. Companies and conglomerates closely associated with the government continued to benefit tremendously from the state’s direct and indirect support. As a result, both the AKP-oriented fractions of the bourgeoisie and the older elite represented by TÜSİAD rallied behind the government.

The main casualty of the government’s new economic plan was, once again, the working classes. Heavy-handed responses to labor mobilization continued under the new “national” orientation. Using a series of exceptional powers mandated by a two-year-long state of emergency—imposed after the failed coup attempt in 2016—the government radically curtailed labor organization and banned strikes on “national security” grounds. As Erdoğan himself stated bluntly, the government used emergency powers to “intervene in workplaces that face the threat of strikes.” In addition to blocking seismic mobilizations such as a strike of 130,000 metalworkers in 2018, the state also violently disrupted workers’ protests, most visibly in the case of those protesting their working conditions at the construction site of Istanbul’s third airport.

Turkish neoliberalism has been shaped by a deep-rooted dependence on foreign capital and imports. Even after the “national” turn, the political fortunes of the AKP still depend on the government’s ability to provide the right environment for international capital. Yet neoliberal globalization did not impose itself on Turkey. A whole range of actors in the country—policymakers, businesses, intellectuals, and ordinary men and women too—actively took part in that process. When the limits of Turkey’s uneven integration into global capitalism became apparent, “national” solutions neither broke from that system nor reorganized economic relations within Turkey. Despite increased social expenditure and ad-hoc attempts to alleviate the disastrous impact of inflation and unemployment, state policy remained anchored in individualizing collective grievances, rather than offering long-term remedies to structural problems. The turn to the nation allowed those who already reaped the benefits of Turkey’s internationalization to exploit their fellow citizens—indeed, to exploit them even more than they were exploited by “global” capital.

Beyond the National Economy

Debates on national development strategies within the structural constraints of global capitalism are not new. When political economists were busy interrogating the limits and prospects of neoliberal globalization in the 1990s, Hugo Radice made the vital point that we cannot formulate a “progressive nationalist” response to those problems by separating the market from the state, the international from the national. More concretely, there is a danger that contemporary left responses focused on “national” alternatives could end up ignoring the key questions of democratic ownership, control, and distribution of resources, and the exclusion of those who fall outside the protection of the nation-state.

If the progressive critics of neoliberalism aim to recuperate the national arena tactically, at least on a short-term basis, to regain policy space back from global capital, they also need to think hard about how to challenge national capitalists they face at home. It is well-documented that the circulation of neoliberal ideas and policies has relied on an extensive international architecture. Yet at the national level, particularly in the Global South, neoliberalism is not merely a policy template disseminated by international financial institutions, think tanks, and economists to shore up the interests of an unaccountable transnational capitalist class. Neoliberalism is actively produced locally by social forces and political actors who recognize its value as a tool for managing capitalist economies, and for using moments of crisis to enact far-reaching, anti-democratic changes.

Turkey’s painful journey over the past seventeen years is a story of a nation-state that has consistently acted as a custodian of capital at the expense of the working class. Its story shows that we cannot put the global genie of capitalism back into its national bottle in the absence of concrete strategies to shift the balance of power between capital and labor.

Cemal Burak Tansel is Lecturer (Assistant Professor) in International Politics at the University of Sheffield, UK. He is the editor of States of Discipline: Authoritarian Neoliberalism and the Contested Reproduction of Capitalist Order (Rowman & Littlefield International, 2017).

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