Turkey’s economy is in shambles and a major part of the blame lies with President Recep Tayyip Erdoğan, who has been stubbornly rejecting widely accepted economic principles in favour of a so-called "morality-based economic model". Erdoğan has justified his policies by quoting verses from the Quran and claiming it is his duty as a Muslim to adhere to Islamic jurisprudence.
Accordingly, Erdoğan has insisted on maintaining low interest rates even as inflation has skyrocketed in Turkey, arguing that Islam is against usury. According to conventional monetary policy, central banks raise interest rates when there is a rise in inflation, thereby encouraging consumers to spend less and save more, ultimately reducing the circulation of money.
Also Read: What’s Behind the Global Surge in Inflation Levels?
Erdoğan’s adamant refusal to abide by such basic economic principles has cost Turkey and its citizens dearly. Inflation has reached a two-decade high of 36% by the end of 2021, consumer prices soared by 14% in December alone, and the Turkish Lira depreciated by almost 50% to the United States Dollar (USD). In fact, vivid scenes of people waiting in agonisingly long lines just to buy bread and gasoline have become commonplace.
Economists warn that if Erdoğan continues to descend down this rabbit hole, Turkey is inevitably headed towards an economic disaster. The country already has the eighth highest inflation rate in the world and experts say that inflation could reach 50% by March. According to scholar and historian Daniel Pipes, Turkey “could go the way of Venezuela,” which has been experiencing hyperinflation since 2016 and hit an inflation rate of 10 million percent by mid-2019.
Pipes argues that the Turkish government’s adherence to religion to determine economic policy “shows a subservience to medieval notions about finance, no matter the harm they cause.” Apart from causing an economic catastrophe, Pipes adds that the resulting chaos could give Erdoğan and his Justice and Development Party (AKP) enough reason to tighten their grip on power and continue their crackdown on political opponents.
In fact, the Turkish President has been busy dismantling Turkey’s secular institutions and promoting ultranationalism at a feverish pace. From supporting domestic and regional radical Islamist groups like the Muslim Brotherhood in Egypt and Hamas in Gaza to converting the historic Hagia Sophia museum to a mosque in 2020, Erdoğan has increasingly positioned himself as the leader of the Islamic world, often promising to fight for the rights of Muslims worldwide.
A column in The Atlantic in 2018 states that Erdoğan’s moves are a “concerted effort […] to galvanise support” from his religious and nationalist bases. In this respect, his defence of lower interest rates, even at the cost of firing top-ranking officials who questioned government policy, has more to do with entrenching political power than transforming Turkey into a global economic hub.
Erdoğan has stated numerous times that he plans to make Turkey a major player on the global stage. To be fair to him, Turkey has become a military powerhouse in the region during his reign — countries from Europe, Africa, Central Asia and the Middle East are eager to purchase Turkish drones, and Ankara holds a lot of diplomatic currency when it comes to negotiating conflicts. For instance, Turkey played a crucial role in mediating the Libyan and Nagorno-Karabakh conflicts.
However, Erdoğan’s plan of making Turkey an economic destination for foreign investors and talent would fall flat if he has no plans to reign in his medieval economic policies. Credit rating agency Fitch has consistently revised Turkey’s economic outlook to “negative” this year and has even called the government’s rate cuts as major “policy missteps.” This would inevitably lead to an erosion of investor confidence in the economy. Usurprisingly, foreign investors are leaving the country in droves as the lira continues to tumble.
Also Read: Despite Good Intentions, Lebanon’s Sectarian Politics Have Done More Harm Than Good
Against this backdrop, it would be wise for the President to take a page from the book of Saudi Arabia and the United Arab Emirates (UAE) on economic reforms. The UAE, for instance, has been undertaking radical economic reforms and gradually liberalising the country in a bid to attract more talent. One of the keys to the Gulf country’s success was the shedding of its heavily religious outlook in favour of a liberal approach. Recent changes include a relaxation of alcohol laws, decriminalising premarital sex, allowing unmarried couples to live together, and changing the work-week in order to be in sync with global financial systems.
Moreover, even Saudi Arabia, who adheres to a strict interpretation of Islam and where Sharia law governs almost all aspects of its citizens’ lives, has begun to relax religious laws to open its economy, especially since Riyadh is depending on foreign investments to ensure the success of its many modernisation projects like the planned NEOM smart city in the Tabuk province. To this end, Saudi Crown Prince Mohammed bin Salman has implemented several reforms, including permitting women to drive, allowing women above 21 to travel outside the country without the permission of a male guardian and hosting sporting and entertainment events.
While traditionally ultra-conservative countries like Saudi Arabia have shown willingness to sacrifice certain religious ideals for better economic results, a fact traditionally ultra-secular Turkey has been regressing towards religious orthodoxy. Erdoğan’s policies, in this respect, can be seen as more of a ploy to stay in power rather than achieving economic goals. Renowned economist Thomas Sowell aptly says in his book Basic Economics that “without an understanding of how an economy works, good intentions can lead to counterproductive, or even disastrous, consequences for a whole nation.” So, unless Erdoğan pays attention to the signs of a severely ill economy and corrects course in time, Turkey’s economic hardships will only continue to grow.