Since the Gezi protests of May 2013 the Turkish economy has become more and more vulnerable; the failed coup of 15 July 2016 and several violent incidents—perpetrated by both ISIS/ISIL/DAESH and Kurdish separatists—have only precipitated a decline that was a long-time coming. Mustafa Sonmez’s column at Al-Monitor gives a useful outline of how the situation got so dire. The ruling Justice and Development Party (AKP) built their reputation on a strong economy and received an average inflow of 38 Billion USD over the past fourteen years, but most of this money was spent domestically—especially in large scale construction projects and consumer loans (after all, people need money to afford the luxury high-rises that have popped up around Istanbul in the last decade). This means that there were no foreign exchange gains; Turkey still does not export anything (even footballers) to a significant degree. The end result of this? As Mr. Sonmez notes “The dollar’s appreciation against the lira since 2013 will be 60% by the end of 2016 if its rise this year is contained at the current 12%.”
The Sharp Downfall Of the Turkish Lira (All Figures Courtesy Of : http://www.xe.com/currencycharts/?from=TRY&to=USD&view=12h)
Clearly, this is bad news for the Turkish economy and those in the country who earn their money in honest ways. In a bid to combat the Lira’s downward spiral, President Recep Tayyip Erdogan told the country on 5 December 2016 “those who keep foreign currency under their mattress should come and turn them into liras or gold”. Subsequently, Turkey’s main stock exchange Borsa Istanbul, changed all their assets into dollars while Mr. Erdogan’s spokesman said on 8 December 2016 that the President had changed all his foreign currency into Liras. As is to be expected, opposition leader Kemal Kilicdaroglu was left wondering whether the shoeboxes of foreign bills belonging to Mr. Erdogan’s associates that were uncovered during a corruption inquiry in 2013 were exchanged as well.
This “war on the Dollar” has also taken some interesting turns. Hurriyet Daily News reports that some restaurants would give free food and drink to those who converted Dollars or Euro into Liras, while one bus company offered free bus tickets and even one marble cutter offered free tombstones to those who show proof of converting 2,000 Dollars. It is ironic that tombstones should be offered, since the decision to convert foreign currency to Liras—in this climate—could be construed by some as economic suicide for low-income individuals and families.
Interestingly, many famous people have also joined this crusade, including footballer Aydin Yilmaz. Former Sivasspor footballer Jacques Faty is seen in a picture proving that he converted foreign currency into Liras , although the fact that he now plays in Australia may mean that his contribution to the “crusade” is questionable. On 8 December, Galatasaray captain Selcuk Inan announced that he would accept a new contract in Turkish Liras and we will wait and see how many other footballers choose to follow suit, since—in the globalized world—football is intimately tied to the global economy.
Celebrities Follow Their Leader. Image Courtesy Of: http://www.sabah.com.tr/magazin/2016/12/09/vatansever-unlu-isimler-dolar-bozdurmaya-kostu
Image Courtesy Of: http://www.haberler.com/eski-sivassporlu-jacques-faty-dolarlarini-9038038-haberi/
The most high profile participant in this frenzy is former Turkish great (and AKP Deputy) Tanju Colak who took an astounding 80,000 USD to an Istanbul change office, saying “we came here to make fun of the Dollar, to burn the Dollar”. Indeed, some of those waiting to exchange their money were allegedly seen burning one Dollar notes (clearly, none were bold enough to burn one hundred dollar bills!).
Mr. Colak (L) Trades In His Greenbacks While The Change Office Employee Looks On With Joy (R). Image Courtesy Of: http://www.yenisafak.com/spor/selcuk-inan-tl-teklifini-kabul-etti-2577034
As if the spectacle of a former professional footballer burning money was not ridiculous enough, the coach of Osmanlispor (a team close to Ankara’s AKP mayor Melih Gokcek) Mustafa Resit Akcay asked the state to come and take 20,000 USD from him. Normally, citizens are reluctant to allow the government to take money from them; I am reminded of a graffito I once saw that asks “why do we need police to protect us from thieves when the government already steals from us?” In Turkey—as is so often the case—the logic is turned upside down. Mr. Akcay said (author’s translation):
Siyasetçilerimizden, bütün siyasetçilerden, devleti yönetenlerden, müsteşarlardan hepsinden özür dileyerek, haddimi aşmadan bu ülkenin bu ekonomik savaşında devletim gelip benden 20 bin dolar alsın. Ve bu aldığı parayı bana 10 sene sonra mı öder, 20 sene sonra çocuklarıma mı öder, nereye öderse ödesin. Vergi dairesinden bir tane adamı yollasın bana, ben de ödeyeyim, paramı vereyim, helali hoş olsun. Ama bunu yaparken devletime bir nezaketsizlik yapmak istemiyorum. Özür diliyorum eğer bir nezaketsizlik varsa.
With all due apologies to our politicians, all politicians, those who run the state, and the councilors, I ask—without overstepping my bounds—for the state to come and take twenty-thousand dollars from me in the midst of this country’s economic fight. Maybe they we will pay this money back to me in 10 years, or back to my children in 20 years; however they pay it they can. They should send one person from the tax collector’s office, let me pay, let me give my money, it’s all ok. But as I do this I don’t want to be rude to my state. I apologize if I have been ungracious.
It is an interesting stance to take, and I cannot fault Mr. Akcay for his nationalism, but it is also an example of the troubling results of globalization and global financial interdependence. The same push back that brought the UK Brexit and the US Donald Trump is now leading to economic nationalism in Turkey.
With currency experts calling this a “currency crisis”, CNBC reported that many American companies are facing trouble in Turkey. With the country downgraded to below investment grade—the latest bombing on 10 December confirming fears—foreign capital has been given another reason to avoid Turkey. As of now, some companies—like GE and Pepsi—are increasing their presence in Turkey. But how long will this last?
The Voice of America expressed fears that this economic nationalism could go to dangerous levels. Atilla Yesilada, a consultant at Global Source Partners, said:
While the patriotic Turks may heed him and will probably exchange their currency holdings, you got to remember that 48 percent of these people don’t vote for him, and they are scared, and many of whom may choose to take their money abroad. Assuming only 10 percent of domestic savers choose to send their money abroad, that would be $9 billion and that would be huge […] That’s where danger lies; action brings reaction. If the government in consultation with banks and the central bank,[sic] realizes those skeptical of the government are taking their money outside the country on a large scale, then you will have capital controls, like [C]hina. You will have limits on what money you can take out and that will really scare foreign institutional investors, who have 80 billion dollars invested in Turkish financial markets, so you might see a chain reaction of them scrambling for the door.
Indeed, capital controls would be disastrous for the Turkish economy, and could even affect the football world. Turkish teams are already suffering on the international stage, if their purchasing power is curtailed it could get even worse. Given that international capital has not pulled out completely, the situation is still fluid and I myself have heard rumors of smaller companies that have decided to pull out of Turkey. In the travel sector, for instance, the Los Angeles Times reported that Albania—the same Albania that used to be off-limits to foreigners during the Cold War under the Enver Hoxha regime—has now replaced Turkey on the cruise circuit.
While I believe that the trend towards reversing some of globalization’s more devastating side effects will continue throughout the world in the post-Brexit and post-Trump world, it will be important to watch for the results of this type of economic nationalism. These are worrying times, perhaps not for the ruling elite (and famous celebrities like footballers) who likely have stockpiles of cash and are using this as a cheap publicity stunt, but certainly for the normal citizen who struggles to make ends meet as it is. Encouraging the everyday person to trade in their foreign currency for one that has lost 11 percent of its value in the last month alone will not help, rather it will exacerbate their difficulties.
Gold Values Have Plummeted Over The Last Month. Image Courtesy Of: http://www.bigpara.com/altin/cumhuriyet-altini-fiyati/1ay
By encouraging people to buy gold, for instance, the value of government issued coins has actually gone down; on 1 December 2016 the value was 887.90 Turkish Liras but following Mr. Erdogan’s announcement on 5 December 2016 the value has fallen to 855.29 on 15 December 2016. For a working class Turk in a country with a 1,300 Lira minimum wage, that loss of over thirty Liras in fourteen days means a lot. This is why it is unfortunate that footballers—extremely wealthy celebrities that are looked up to by people from all walks of society—should be following the government in encouraging those with much less wealth to do things that may not be in their immediate best interests, economically at least.