The statements at last week's general assembly meeting of the Turkish Industry and Business Association (TÜSİAD), the reactions to them, and the legal process initiated after President Recep Tayyip Erdoğan's remarks of “You will know your place” in his speech at the parliamentary group meeting show that the tension between TÜSİAD and the ruling Justice and Development Party (AKP) is gradually escalating.
Why is it happening now? Or what are the political economy dynamics behind these? In this column, I will propose answers to these questions, albeit briefly. Before I get into the details, I would like to point out the following. There is a widespread belief that TÜSİAD has received a strong reaction from the government for the comments on the rule of law. Although on the surface the debate appears to be political, the main dynamic of the recent tension between the government and TÜSİAD is economic, not political.
To be more explicit, the disagreement on how to respond to the crisis of the accumulation/growth model in Turkey after 2013 and what the growth strategy to be developed against this crisis should be constitute the core of the debate within the ruling bloc. The emphasis on the rule of law in the statements of TÜSİAD executives is not new. What is new, however, is that criticism of Finance Minister Mehmet Şimşek’s program has been voiced out loud for the first time.
2019 and 2021: Two key milestones
Recently, there have been two critical tensions between the Erdoğan government and TÜSİAD. The first took place in the spring of 2019 and the second in the fall of 2021. The tension in 2019 was again over a TÜSİAD High Advisory Council statement. Özilhan, then-chair of the council, complained that the austerity measures promised by the Berat Albayrak-coordinated economic administration had not been implemented, while the Erdoğan government accused large capital holders of not participating in the employment mobilization launched by the government.
The background to this tension, however, was that the interest rate hikes that followed the currency crisis in 2018 resulted in a credit collapse and corporate bankruptcies. When this process led to an economic crisis and skyrocketing unemployment, the AKP lost metropolitan cities, particularly Istanbul and Ankara, to the opposition. Therefore, although the austerity measures pushed by TÜSİAD were postponed, the political cost of the interest rate hikes for the AKP was the loss of the local elections. In this period, the Erdoğan government was rescued by the change in the global conjuncture. After the US Fed cut interest rates again, the Turkish central bank was able to cut interest rates by a total of 12 percent in 2019 and the economy started to revive.
The second tension between the Erdoğan government and TÜSİAD was during the interest rate cuts that started in September 2021. Especially in December, when the interest rate cuts were nearing their end, the rapid depreciation of the Turkish lira and the rush to foreign currency caused TÜSİAD to criticize these policies in some way. During this period, President Erdoğan harshly criticized TÜSİAD and accused the bosses of not contributing to the increase in production and employment. Despite TÜSİAD's criticism during this period, there was no fundamental change in economic policy until the appointment of Mehmet Şimşek as the Minister of Treasury and Finance after the 2023 elections.
2019 and 2021 were critical turning points. However, it is not possible for me to devote more space to these two periods in this column, so for details, please refer to my book Krizin Gölgesinde En Uzun Beş Yıl (2018-2023): Türkiye’de Kriz, Siyaset ve Sermaye ("The Longest Five Years in the Shadow of the Crisis (2018-2023): Crisis, Politics and Capital in Turkey").
What is the problem now?
The problem now is that the 'magic' of the Şimşek program has disappeared and the economic administration’s strategy to reduce inflation by appreciating the lira has reached its limits.
While the appreciation of the Turkish lira was initially a challenge only for exporters in labor-intensive sectors, as the process progressed, it also became a concern for established capital groups. The following statements made by TÜSİAD President Orhan Turan are striking for those who closely follow state-capital relations: “The cost of fighting inflation is becoming harder to bear. Both for entrepreneurs and employees. Industrialists are having a hard time. Exporters are suffering. The attractiveness of imports is increasing.”
These statements are critical in the following respect: The fight against inflation through the appreciation of the Turkish lira has been a challenge for small-scale firms, especially in labor-intensive sectors. For example, the layoffs of thousands of workers in the textile sector and even the relocation of companies to Egypt have been widely discussed recently. Likewise, the Turkish Exporters Assembly (TİM) has repeatedly stated that the appreciation of the Turkish lira has put a strain on many sectors. However, the stance of TÜSİAD in response to these statements was that one cannot compete through the devaluation of the Turkish lira and that international competitiveness can be achieved by producing high value-added products.
This position has changed dramatically with Turan's latest statement. So much so that if we did not know the identity of the person who made the statement, we might have thought that these criticisms were directed by TİM. This means that the Şimşek program is left unattended. Because this program was mostly based on the support of TÜSİAD, if this is changing, the fate of the Şimşek program is becoming more and more uncertain. In other words, the number of capital groups criticizing the Şimşek program and especially the central bank's interest rate policy had gradually increased, and we can even say that TÜSİAD was the only one left to defend it. This is also changing now.
Then?
Finally, we can make the following point. TÜSİAD's statements were a good opportunity for the Erdoğan government, which is overwhelmed by the erosion of real wages and the failure to resolve the cost of living crisis: The Şimşek program was perceived by the public as the program of TÜSİAD and the bosses, despite the efforts to the contrary by market commentators and seemingly dissident economists. However, Erdoğan's harsh outburst and 'putting the bosses in their place' after TÜSİAD's statement may help to alleviate the criticism that 'the bosses' program is being implemented'. Especially in an environment where real wages are being suppressed and unionists who object to this are being arrested, as we saw in Gaziantep, the government's attempt to differentiate itself from the bosses may be a useful political strategy in the coming period.
However, what is more important is that while the Şimşek program can be seen as successful in terms of reducing the risk of a balance of payments crisis, it has no exit proposal for the structural crisis of Turkish capitalism. In other words, the question of what kind of growth strategy to follow in the structural crisis conjuncture after 2013 is still unanswered. The political power is using this uncertainty to deepen its authoritarian consolidation project by making periodic alliances with different capital factions. But this problem is not solved and will eventually come back to haunt them. I can almost hear the question 'where is the opposition' in this picture. Let me end this column with this question: Where do you think the opposition stands in this picture?