Upset over the debilitating economic situation in Turkey, hordes of people took to the streets in Istanbul and Ankara this Tuesday, calling on President Recep Tayyip Erdogan and his AKP Party-led government to resign.
“AKP, this is our country, go away,” protesters chanted in Istanbul in response to high inflation rates and yet another crash of the lira, Turkey’s currency.
The latest developments in the Turkish economy are a result of the unorthodox approach to inflation taken by the country’s leadership.
ThePrint explored how Erdogan’s politics behind keeping low interest rates has triggered problems for Turkey’s economy.
WATCH: How Erdogan is Destroying Turkish Economy ?
During Erdogan’s tenure, the country has also been slipping into an increasingly authoritarian one. Turkey has seen a major decline from an “electoral democracy” in 2010 to an “electoral autocracy” in 2020, according to Sweden-based independent research institute V-Dem and this has raised credibility issues with its institutions, including the TCMB.
The professor ThePrint spoke to also explained how faculty in various state-run universities are afraid to teach basic monetary policy theory to students, fearing some may be stooges who will report them to the government. “About 10 or 15 years ago, it was much easier to talk about the economy in Turkey. Now, we are afraid,” the professor said. “I know what Erdogan says about high interest rates causing inflation is totally wrong but when my students come to ask me if it is true, I am scared to answer. I always end up telling them the truth but I have been warned that some could end up reporting me to the government and I could face action.”
Erdogan endorsing ‘Islamic economics’?
Though Turkey is a secular country, Erdogan’s politics thrive on promoting Islam. His support to the infamous and now banned Egypt-based Islamist organisation, Muslim Brotherhood in (which he withdrew later), the reversion of the Church Hagia Sophia to a mosque, are some of the evidence to this.
Some experts now believe that it is his religious beliefs that are driving Erdogan’s economic policies.
For instance, in Islam, Riba prohibits usury, a practice of charging exorbitant interest rates is severely prohibited.
In his book, “Why as a Muslim, I defend liberty”, Mustafa Akyol writes, “In mid-2010, after a decade of economic success thanks to pursuing conventional economics and institutional reforms outlined by global markets and the European Union, President Recep Tayyip Erdogan reverted to his old Islamist ideology. That included a conspiratorial rhetoric about the ‘interest system’, or ‘the mother and father of all evil’”.
Akyol is a senior fellow on Islam and Modernity at the Cato Institute, an American think-tank based in Washington DC.
Speaking to ThePrint, Akyol explained how Erdogan has changed his stance on interest rates. “President Erdogan’s dogmatic insistence on his peculiar theory about interest rates, which comes from the Islamist ideology that he had claimed to have abandoned in the early 2000’s, when he was embracing the European Union path, which, at time, worked for him”, he said.
Even in the present day, Erdogan hasn’t let go of Islamic values. In January, Turkey’s state-controlled top religious authority, the Directorate of Religious Affairs, passed a fatwa (ruling) stating that interest-based home loans were exempted from the ban on usury, so long as they were for the purchase of real estate in a government housing project.
The Istanbul professor believes that Riba is just one of the factors impacting Erdogan’s distaste for interest rates. .
“Riba is important for the president’s voter base — they are mainly conservative and fundamentalist. But I don’t think this is the main reason,” the professor said. “For quite some time, Erdogan tried to keep the lira afloat but now I think he is taking drastic measures because there is not enough foreign currency in the central bank. So now they are trying to focus on export-led economic growth to get as much money as they can.”
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