Turkey shifts to socialist economy?

After October 3 government-published average monthly and annual inflation proved to be up 3-4 times from forecast figures, Turkish Minister of Finance and Treasury Berat Albayrak presented the public on October 9 "All-round Program of Inflation Fight". In his words, he will be fighting the inflation jointly with the whole 81-million population of the country. Manufacturing companies will lower wholesale prices by 10%, a limit will be set in respect of consumer loans and payment of expenses with credit cards. Also, the Central Bank is going to reduce rates; half of VAT worthy of $24 billion will be returned within 10 days; electric power and gas prices will not be raised till the end of the year, etc.

However, Minister Bayrak again declined from specifying ways of servicing the very high foreign debts. While the settlement of foreign debt and identification of new credits is an essential requirement for promoting the economy and its conversion into growth stage.

The Program also provides for rendering a financial aid to companies in oprder that they decline from reducing workers as less as possible. As was the case with $24 billion worth VAT repayment, no specific sources are mentioned to fulfil the promises.

Of interest is the fact that Koç Holding was the first to have backed 10% drop in wholesale prices campaign. The point is that just 5-6 months ago Rahmi Koch, 87-year old honorary president of the holding who has always been pressured by AKP goverrnment and barred from big tenders, declared: "from now on we shall not invest a 1 kurush in Turkey".

Having declined from services of the consulting firm McKensey, Turkey has mobilized its internal resources to combat the economic crisis as is evident from the October 9 Minister Bayrak"s program. However, measures as set forth in the Program are indicative of Turkey"s ever growing departure from standards of market economy.

It has to be kept in mind that amendments in the laws, daily warnings of President Erdogan addressed to market actors, control of municipality heads over prices at tregional markets, etc. are reminiscent of processes that occurred in Russia straight after the victory of the socialist revolution.

A question arises: if, as the Albayrak Program provides, manufacturing companies agree to reduce prices by 10%, why have they set designedly high prices?

If the price reduction was acceptable, why do they fulfill their promise under the government"s pressure (it"d be naïve to believe that the question is about a voluntary step of manufacturing companies)? If actions of the government before and after promulgation of the Ministry"s Program is not "a government"s control over prices", what are they in reality?

It should be remembered that even during a serious economic crisis of 2001 the government took measures within the framework of market laws and showed loyality in respect of citizens and public organizations in an effort to lower possible tensions in society.

On the other hand, in terms of unfulfilled promises on reducing rates and returning to moderate inflation following the presidential and parliamentary elections of June 24, it turns to be impossible to reveal any specific ways of problem resolution in the Ministry of Finances and Treasury"s announced programs.

If no force-majeure situations take place in the world, the government is committed not to push up prices for gas and electric power till the end of the year. What are criteria of "emergency situations"? Who guarantees that any allegedly force-majeure situation will force the authorities to put up prices?

One of country"s veteran economists, Prof. Korkut Boratav warns that if the situation continues, all these would lead to "meal tickets and shopping lines". Other analysts hold that to escape the worsening of their position during their forthcoming March 2019 municipal elections, the authorities will keep the situation under their control.

It must be remembered that a post-election rise in prices cannot influence the government"s fate. But will the authorities, apprehensive of the results of elections and setting prices independently, as was the case in the socialist system, keep the situation under strict control? It is not unthinkable ...