Turkey is no Egypt

Just before Turkey’s holiday week, the Emir of Qatar was in Ankara for a short visit. The news eagerly reported that at the hour of Turkey’s need, the Emir pledged to invest $15 billion into the Turkish economy. Turkey’s international investors might have been happy to hear this, but I am deeply saddened that it has come to this. It gives the impression that Turkey is like Egypt, a country that is frivolous with its money and, then travels around the neighborhood, hat in hand. But why Turkey now?

When it comes to handling economic policy, I used to see two types of countries in the Middle East: countries that resort to monetary and fiscal policies to correct their imbalances and countries that resort to the oil-rich Gulf to do so. The former is about taking sustainable measures to regain access to international markets, the latter is about finding more fuel for your extravaganza.

Israel and Turkey are in the first category and all the other could be lumped together in the second. Why? Israel and Turkey are the only market economies of our region, while the rest can easily be called command economies. That is why Israeli-Turkish commerce has not ended despite bad relations between the two capitals. Commercial relations with command economies require the blessing of their respective capitals, whereas market-based interaction can continue despite political tension.

Turkey used to be in the first category until its current balance of payments crisis. If I recall correctly, this is the first time that a Turkish leader has decided to resort to the oil-rich Gulf to fund the imbalances of the Turkish economy. It’s kind of like messing up one’s chemistry and resorting to alchemy. The Egyptians might do it, but it’s very un-Turkish to me.

Turkey is no Egypt. Just take a look at the current account deficits of Egypt and Turkey. The deficit you have to fund in Egypt is around $9 billion , while in Turkey it is $55 billion. The Turkish economy is much more complex than the Egyptian one. Egyptian per capita GDP is at the level Turkish per capita GDP of the early 1990s. So Turkey is a bigger and more industrial country, and qualitatively totally different from Egypt.

Then why this move by a country like Turkey? Putting aside the obvious domestic structural reasons in Turkey, a big part of it is that unbridled American unilateralism breaking any hope of a possible “technical” recovery in times of need. Crisis by crisis, transatlantic problems are becoming harder to resolve. It is this same feeling that has led German foreign minister Heiko Maas to float the idea of a new international financial architecture without the Americans, in an op-ed this week.

“But also” noted Mr. Maas, “That we will not allow you [the US] to go over our heads, and at our expense. That is why it was right to protect European companies legally from sanctions. It is therefore essential that we strengthen European autonomy by establishing payment channels independent of the US, a European monetary fund and an independent SWIFT [payments] system.” Why is Turkey looking more like Egypt? This is a big chunk of the answer. My take exactly

Back in December 2017, when Mr. Trump was elected, I remember writing a piece entitled “Welcome to the age of global reckless driving”, saying “If Castro is the occasional pothole on the road, Mr. Trump is the drunk driver sitting right next to you.” Let me this time end on a Churchillian note: this may not be the end of American supremacy, nor the beginning of the end, but if no one stops Mr. Trump, it could well be the end of the beginning. It’s not the man’s policies, mind you, it’s this gangster attitude that is breaking up the order of things.