Last week's economic agenda was mainly the announcement of the Medium Term Program in Turkey. In this column, I will first briefly highlight a few points that I consider important in the program. Treasury and Finance Minister Mehmet Şimşek discussed both the program and the economic trajectory at length in a program on CNN Türk earlier this week. Secondly, I will point to an interesting discussion that took place during this program.
The program and the intentions of the economic administration
The Medium Term Program can be taken seriously as a text in which the economic administration conveys its views on the main development trajectory of the economy between 2025 and 2027. However, rather than looking at this text as a 'program' as the title implies, it would be more appropriate to look at this text to understand what the mental map of the economic administration is and how they see the process. When viewed in this way, the program highlights the fragilities and contradictions in the social and class ground on which the Şimşek’s program is based.
The first point I would like to emphasize is that the program presents us with a 'soft landing' story. According to this, as a result of raising interest rates, the economy will slow down in 2024 and growth will slow down to 3.5 percent. However, in 2025, growth will rise again to 4 and in 2026 it will rise to 4.5. In other words, the interest rate hike will not cause an economic contraction like in 2018.
According to the program, the situation is brighter in terms of employment! According to the economic administration, despite the high interest rate in 2024, unemployment will fall compared to 2023 and will be 9.3. In 2025, unemployment will rise to 9.6 due to low growth, but will then start to decline again.
On the other hand, inflation is projected to be 17.5 in 2025 and 9.7 in 2026.
Many have pointed out that there is a discrepancy between these data, so I won't go into detail, but let me just say this: It is not realistic for inflation to fall while economic growth continues and unemployment declines. In terms of global financial conditions, it is very difficult, if not impossible, to achieve all of these targets at the same time, even if we take into account the possibility that global interest rates will decline from the end of 2024 onwards, thereby accelerating capital inflows to Turkey.
One of the factors that could make this difficult goal possible is to further increase the burden on employees. Real wage losses in recent years are well known. The program does not include any repair measures to compensate for these losses. On the contrary, there are wishes for further flexibilization of working life. We can consider these wishes together with some demands from the Istanbul Chamber of Commerce. In a nutshell, the bosses want the Labor Law to be reformed to be 'economy-friendly', that is, boss-friendly, and demand more freedom in hiring and firing conditions. They demand a flexible labor market based on disposable labor.
So let's put these developments together: The conditions necessary for the realization of the ambitious targets of the Medium Term Program can only emerge with more pressure on labor. Therefore, there are two main agendas for the labor front and the opposition in general in the coming period.
The first is short-term: whether wage increases in December will be based on the 'expected inflation' set by the economic administration. If the government's framework is accepted, the cost of the cost of living crisis will be borne by employees.
The second is how employees and the opposition in general will act in the face of the threat of further flexibilization of the labor market, on which different capitalist factions have agreed and the economic administration has declared its intentions. If this new offensive cannot be defeated, the bargaining power of employees will be further eroded.
Şimşek and the historical bloc
Having touched on some of the issues regarding the program, let me conclude this article by mentioning a TV program Şimşek participated. Towards the middle of the program, an interesting discussion developed.
When Ahmet Hakan pointed out the similarity between the economic policy advocated by mainstream economists in the opposition and the economic policy implemented by Şimşek, Şimşek confirmed this and commented that “in fact, whoever took office would not implement a very different program.” Şimşek spoke with the comfort of the emergence of an opposition line integrated with the government, which I explained in my book 'The Longest Five Years in the Shadow of the Crisis (2018-2023): Crisis, Politics and Capital in Turkey'. This environment of 'no opposition' opens up an enormous field of action for the government. Therefore, once again, the expectation that 'economic problems will automatically spell the end of the AKP' is unrealistic.
However, what is more interesting that Hande Fırat expressed the real sector's criticism of the Şimşek’s program, and in particular that the Şimşek’s program was being targeted with criticism not only from the opposition but also from the ruling circles. In response, Şimşek commented by laughing that 'there is a very broad front, Gramsci's historical front'. What he meant was Gramsci's concept of the historical bloc. Şimşek is right about this.
Different economic policies prioritizing the interests of different capitalist factions have shaped the past years. However, it is clear that these economic policies have not brought prosperity and happiness to large segments of society. The problems in the economy cannot be resolved and are growing enormously. Therefore, the fate of the country will be determined by the emergence of a counter-historical bloc with political and economic alternatives to overcome this deepening crisis of hegemony.