Mustafa Kemal Ataturk liked to say “the villager is the master of the nation”. Two years after founding Turkey in 1923, he opened Ataturk Forest Farm, an expansive agricultural preserve on the edge of the capital city of Ankara.
Over the years, administrators turned much of it into a recreation area, adding restaurants, a brewery, dairy farm and zoo to help draw visitors. But in 2013, Turkish leader Recep Tayyip Erdogan announced plans to build a $600 million palace on the grounds.
Despite opposition appeals that building in Ataturk’s farm was illegal, construction went ahead and the 1,100-room Ak Saray – or White Palace – opened in 2015. Adding insult to injury, last year the state housing agency moved to sell off chunks of Ataturk’s farm to developers.
Meanwhile, the nation’s supposed masters have hit hard times. When Mr Erdogan came to power in 2003, Turkey’s 2.8 million farmers owed a total of 2.5 billion liras in debt (almost $270 million), or 893 liras per farmer. Today the country’s 2.1 million farmers owe 180bn liras, or 85,715 liras each – a nearly 100-fold increase in debt. As a result, many are looking to sell their land to construction firms.
Turkish farmers are far from alone in their desperation. The pandemic has driven more than 1.5 million people into poverty, and the number of loans given out by banks and other institutions has increased 36 per cent since March 2020. Even so, nearly 48,000 shopkeepers went bankrupt in the first six months of 2021, according to theTurkish Trade Registry Gazette, while some 85 per cent of Turkey’s small and medium-sized businesses are in debt – owing nearly 1 trillion liras in all.
Housing prices in Turkey increased nearly one third in the past year, the highest increase in Europe by a sizable margin. Last November, after Lutfi Elvan replaced Mr Erdogan’s son-in-law Berat lbayrak as treasury and finance minister, he vowed to install a package of economic reforms to help stabilise the economy. More than nine months later, there’s been no movement.
No surprise, then, that more than three out of four young people in Turkey are concerned about the economy, while nearly two out of three had a job loss within their household during the pandemic, putting Turkey among the bottom three countries in the OECD survey.
The presence of more than 4 million refugees is a key contributing factor. The government, which opened its borders early in Syria’s civil war, has portrayed the cheap labour of migrants as key to Turkey’s economic survival, even as many Turkish citizens struggle with unemployment and under-employment. The resulting resentment exploded in Ankara’s Altindag district last week, as hundreds of locals went on a rampage, destroying countless Syrian homes and businesses.
A stream of corruption charges is doing the government no favours. The latest is Arif Barata, an adviser to Agriculture and Forestry Minister Bekir Pakdemirli, who acknowledged last week that he is facing seven criminal lawsuits and has previously served time in prison for involvement in a bid-rigging scheme.
To top it off, the government has reached out to its people for donations in response to the pandemic, the wildfires in the south and last week’s devastating flooding in the Black Sea region. “You can live in a palace and donate 30 million dollars to Somalia,” said a popular Twitter user in Ankara, “but why can’t you help your people from whom you collect taxes?”
Turkish anger and frustration has been festering for years. From 2011 to 2019 – the last year for which statistics are made available by the Turkish Statistical Institute (TUIK) – annual suicides in Turkey increased nearly 30 per cent. In the lead-up to last month’s Eid holiday (Bayram in Turkey), credit card spending hit an all-time high and the main opposition Republican People’s Party (CHP) warned that this would lead to more debt and an increase in inflation.
This remains the crucial issue for Turkey’s economy: the fraught relationship between inflation, interest rates and the value of the lira, which has declined nearly 50 per cent since 2018. Back in March, when Mr Erdogan dismissed then Central Bank governor Naci Agbal, who had just raised interest rates to 19 per cent, most observers believed he had done so in order to install a replacement who would obey his calls for a cut.
The longtime Turkish leader is among those who hold the unorthodox view that lower interest rates curb inflation, and he has dismissed three Central Bank governors in a little more than two years. But for the fifth straight time since Mr Agbal’s dismissal, the Central Bank last week refrained from cutting benchmark interest rates. Meanwhile, inflation increased to almost 19 per cent in July, an 18-year high.
Analysts expect inflation to continue to rise, or at least hold steady, as the economy sees some positive signs. Gross domestic product increased as much as 12 per cent in the first half of the year, which would be the highest in the G20. Foreign direct investment is up 13 per cent this year. And last week, TUIK said unemployment had fallen to 10.6 per cent, down from 13.1 the previous month.
The choice for the Central Bank governor seems clear: accept TUIK’s potentially doctored numbers, or question TUIK’s integrity and more than likely get the axe
This marked the largest decline in years, which raised suspicions. “A miracle happened!” Yenicag columnist Evren Devrim Zelyut sarcastically asserted, wondering if Chinese manufacturing had magically been transferred to Turkey. Others questioned TUIK’s inflation figures, which squeezed just under the Central Bank’s stated goal of keeping the interest rate above inflation.
Korkusuz columnist Ahmet Takan, a former press adviser in the prime minister’s office, wrote that TUIK recently transferred nine top regional officials who refused to manipulate inflation data to more junior positions. TUIK denied any such moves and said its work is transparent and impartial.
But since 2018, Mr Erdogan has replaced more than half of TUIK’s executive board and he recently predicted inflation would fall in August. Some news outlets have reported that TUIK officials may have manipulated price data collection, and CHP Vice Chair Veli Agbaba pointed out that the price of sunflower oil increased 60 per cent, chicken and margarine by half and eggs by 27 per cent over the past year. “Most likely, real inflation is now significantly above 19 per cent,” economist Erik Meyersson commented last week on Twitter.
Many observers expect TUIK to lower inflation in their next report. “It is not possible for inflation to accelerate further, because we’re transitioning to lower interest rates,” Mr Erdogan said in a recent interview. “August is the turning point.”
The choice for Central Bank Governor Sahap Kavcioglu seems clear. Either accept TUIK’s potentially doctored numbers for August and make the expected cut, or question TUIK’s integrity and more than likely get the axe.
The outlook for Turkey’s economy, and for Ataturk’s masters of the nation, is likely to remain considerably more uncertain.
David Lepeska, a veteran journalist who has reported to top outlets including the New York Times, the Guardian, and the Atlantic, is the Turkish and Eastern Mediterranean affairs columnist for The National