Turkey and corruption

I have previously posted some of my concerns about the future of Turkey and the role of the Islamist party, AKP. Claire Berlinsky has a new piece about corruption and the AKP. She believes that the Islamist threat is exaggerated but the real enemy of Turkish success is corruption.

The AKP came to power promising reform. It has stayed in power because it is perceived, in Turkey, to be delivering reform, and it has received tremendous support from Europe, the United States, the International Monetary Fund, the World Bank, foreign investors, and the foreign press for the same reason. If the AKP is not, in reality, getting very far—if the reports of substantial reform are wrong, predicated on faulty data, and derived from faulty analysis—then it is only a matter of time before Turkey experiences its next major financial meltdown, much like the one that brought the AKP to power in the first place. When this happens, the AKP will be voted out of power, if it has not already been ousted by the courts or the military.

I criticized Condaleeza Rice in my other post for her support of AKP, whether they are honoring the secularist traditions established by Ataturk or not. Berlinsky believes that their success is a house of cards.

Here are some commonly reported statistics: when the AKP took power, foreign direct investment (FDI) in Turkey was $1 billion; in 2007, FDI stood at $19.8 billion, an amount equal to the past 20 years combined. Under the AKP, Turkey’s average economic growth rate has been over 7 percent, compared with an average of 2.6 percent during the previous decade. Per capita income rose in their first term (2002-2007) from $2,598 to $5,477. In the 1990s, inflation reached highs of 100 percent; under the AKP it has been reduced to an average of 10 percent. Foreign debt has declined from nearly 80 percent of GDP in 2001 to less than half of GDP today. The budget deficit has dropped from 16 percent of GNP to 1 percent. Public sector debt has been reduced from 91 percent of GNP to 51 percent.

Looks good, doesn’t it? I thought so, too. Previously, I have accepted these statistics at face value and applauded the AKP’s economic record. But having looked more closely at the question, I am now recanting. These statistics might be right, but they might also be nonsense. The truth is, nobody knows.

Turkey has an enormous underground economy, much of it may be illegal. Nobody knows where the money comes from. There are rumors that a small group of secretive figures really runs the country.

I say this because Turkey has one of the largest underground economies in the world. By definition, data about the size of the underground economy do not exist. But economists in Turkey estimate it to be worth somewhere between one-third and two-thirds of Turkish GDP. Every major economic sector in Turkey—agriculture, construction, markets, textiles, tourism, shipping—is largely underground, off-the-record, and undeclared. No one knows how big these sectors really are. No one knows if they are growing or shrinking. No one knows how they are being financed. No one knows where the profits are going. Of the 23 million people working in Turkey, only 10 million are working on the record. The economic growth rates commonly cited in the press cannot be meaningful. They cannot even be approximate. They probably pertain to less than half of the Turkish economy.

Osman Altug, an economist at Marmara University who specializes in the study of Turkey’s underground economy, told me that he can think of only one country in modern history with an underground economy so large by comparison with the official one: Argentina under Carlos Mendez. “Not even Africa is this bad,” Altug said. Other economists may not go so far, but most agree that as underground economies go, Turkey is top-tier.

Read the rest. It is not reasuring.

Tags: , , , ,

Comments are closed.