Who jeopardizes Şimşek’s seat?

Last week's economic agenda was dominated by growing doubts about whether the Treasury and Finance Minister Mehmet Şimşek would continue in office. Although both the Ministry and Şimşek himself have declared that he will continue, the debates are not completely over. Therefore, in this week's column, I will discuss whether Şimşek's seat is in jeopardy or not, but not on the basis of 'rumors'- or to put it more politely 'backstage news'- but on the basis of social dynamics.

First, let's talk about some of the recent data released last week. According to the Real Sector Confidence Index, firms' expectations for employment in the next three months have deteriorated. In other words, it is almost certain that unemployment will increase. They expect orders from the domestic market to decline further in the next three months. Moreover, export orders are expected to decline in the next three months as the domestic market shrinks. In short, industrialists expect an economic contraction.

The second indicator is the Capacity Utilization Rate of Manufacturing Industry. This indicator also points to an economic slowdown. Capacity utilization in the industry has decreased both compared to a year ago and from month to month.

Here we face a dilemma. The economic administration keeps interest rates high to suppress demand. However, inflation expectations, especially those of households, are not declining, while total production capacity, i.e. supply, is decreasing. In this situation, can we talk about a permanent fall in inflation?

Two more data points are worth mentioning. First, we see that the number of firms declaring concordat as an indicator of firms' difficulties in debt repayment has increased. In fact, the number of firms declaring concordat due to debt payment difficulties has reached the levels of 2019, the year of economic contraction, according to Güven Sak's assessment.

Finally, when we examine the household debt data, we see that non-performing loans are also rising rapidly. This is a direct consequence of high interest rates. In other words, for large segments of society, whose purchasing power has already declined due to the cost of living crisis, the ways for financing their expenditures with debt are also closing.

In short, taking the data of the past week together, we can foresee that the slowdown in the economy may be faster than expected and that economic difficulties, particularly the rise in unemployment, will intensify in the coming months.

After this brief summary, we can make the first conclusion: The crisis tendencies that jeopardize Şimşek's seat have become more pronounced.

But the issue is not limited to this. For several weeks now, tractors have been moving in many provinces in protest one after the other, reflecting the growing discontent of farmers. The agricultural sector, which is unplanned and left to the market and the initiative of big buyers who have the power to set prices, is no longer a source of livelihood for many farmers. The low price at which farmers sell their crops in the face of high input prices and the increasing unpayability of debts are some of the reasons that mobilize tractors.

However, just as with the capacity utilization rate, here too we encounter a dilemma with the Şimşek program, which is based on suppressing the demand of middle and lower-income groups. How will food prices, which are already very high compared to the rest of the world, fall when farmers are moving away from agriculture?

So, we can make the second conclusion: It is the tractors coming from afar that jeopardize Şimşek's chair.

The Restructuring Of The Ruling Bloc

Although the Şimşek program is not designed as a 'shock therapy', its aim is to liquidate the Nebati program. However, this is not something that can be achieved simply by manipulating some macroeconomic variables. The reason for this is that just as the emergence of the Nebati program was a result of a shift in the balance of power within the ruling bloc, the liquidation of this program similarly requires a shift in the balance of power within the ruling bloc.*

Complaints from SMEs with limited access to credit, from exporters complaining about the real appreciation of the Turkish lira, from constructors complaining about high interest rates, from shopkeepers suffering from the slowdown in the economy, and, finally, from labor-intensive sectors such as textiles are increasing. These complaints are an indication that the anti-inflation program also requires a restructuring within the ruling bloc.

In this case, we can make the third conclusion: Other capital fractions other than big capital are also preparing to jeopardize Şimşek's seat.

Şimşek’s Seat

Despite all these developments, it would not be reasonable to expect any change in the economic administration in the short term. Because even if crisis tendencies deepen or tensions within the ruling bloc emerge, unless the opposition emerges to propose an alternative to the current economic program, Mehmet Şimşek will likely keep his seat and the program, which places the cost of the cost of living crisis on the middle and low-income groups.

Nevertheless, it is still worth being a bit cautious on this issue. We may have to revisit the issue of Şimşek’s seat after the behavior of the employees and the government during the wage negotiations in December.

These are my thoughts for the short term. In the long run, I think the opposite. In other words, there may not be a big difference between the possibility of Şimşek keeping his seat in the short term and the possibility of him leaving office in the long term.

*Those interested in the details of this debate can 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) (especially Chapters Seven and Eight), published last week. I will write about the book in more detail in the coming weeks.