Global Policy Forum

Anchors Aweigh

Economic forecasts predict that Turkey's economy is likely to grow faster in 2011 than all other European countries. Coupled with increasing political stability, favourable demographic growth and geographical positioning, this economic stability in the face of the Euro's fragility has granted Turkey newfound strategic importance. This article addresses Turkey's growing political power and questions whether, after decades of debate over EU acceptance, Turkey can even profit from EU membership.

October 21, 2010

It can take decades to change the image of a country. Yet Turkey has managed the trick in less than one. Ten years ago it was a basket-case. Its economy was both sclerotic and erratic, its banks were bust, and inflation was dizzyingly high. It was forever calling in the International Monetary Fund for help (Turkey has run up some 18 IMF programmes, a near-record). Politics was also worryingly unstable. Even though the country was an established democracy, a string of weak and short-lived coalition governments alternated with the occasional coup staged by a powerful army.

As a member of NATO that was for many years on the front-line of the cold war, Turkey was at least a reliable ally of the West. But its regional influence in 2000 was almost as feeble as its economy. The Turks insisted that they wanted to join the European Union, but they had made almost no progress. Just over a decade ago they were humiliatingly overtaken in the race to be EU candidates by the ex-communist countries of eastern Europe.

Yet ten years on Turkey stands transformed. The economy suffered badly in the global recession of 2009, but over the previous five years it had been unusually vigorous, and it has bounced back so quickly that this year it is likely to grow faster than those of almost all other European countries. Turkey has largely escaped the Mediterranean sickness that has taken hold in Greece, Spain, Portugal and even Italy. It is on the verge of acquiring an investment-grade credit rating, inflation is in single figures and the government has been able to dump the IMF.

The political situation has also greatly improved. After nearly eight years of single-party rule by Recep Tayyip Erdogan's Justice and Development (AK) party, the army has been largely tamed. With exquisite timing, Mr Erdogan won a referendum on constitutional changes to increase his control of the army and judiciary on September 12th, the anniversary of a 1980 military coup. The AK government has pushed through an impressive array of political and economic reforms. One reward was the formal opening in October 2005 of negotiations for EU membership.

Pillar of the international community

These changes have not gone unnoticed. Turkey is now a vocal member of the G20 club of important economies. It held a temporary seat on the United Nations Security Council in 2009-10. It is knocking on the door of the BRICs club of emerging giants. Some forecasts suggest that during the next decade it will grow faster than any country bar India and China. Others predict it could become the world's tenth-biggest economy by 2050.

That is partly because of Turkey's favourable demographic outlook. The average age of its 72m people is only 29, against over 40 in the EU. By 2050 its population will have risen to almost 100m. If by then Turkey has managed to get into the EU, it will be its most populous member, far ahead of Germany, which will have a mere 70m people.

But there is more to Turkey than a flourishing economy and a young population. Whereas ten years ago it seemed a peripheral country, now it has become a pivotal one. Its geographical position, wedged between the European landmass, Russia and the Middle East, has given it a new strategic importance, especially in the energy-pipeline business. And its newly assertive foreign policy is making it count not just in neighbouring countries but as far afield as China and Africa.

Turkey has an especially significant place in the Muslim world. Thanks to the legacy of Ataturk, it is a rare example among Muslim countries of a functioning secular democracy. Compared with much of the Arab world, it has been hugely successful in economic, diplomatic and military terms. A Turk currently serves as secretary-general of the Organisation of the Islamic Conference. And since his country's diplomatic spat with Israel earlier this year Mr Erdogan has become a hero to the Arab street. Many Arabs compare him favourably with their own gerontocratic (and undemocratic) rulers.

Trouble spots

In short, Turkey matters today in a way that few would have thought possible a decade ago. Indeed, in some ways it counts for more than when the Ottoman empire was crumbling a century ago and Turkey was widely known as the "sick man of Europe". And yet there are persistent blemishes on its seemingly bright prospects.

One is the Kurdish question, of which more later. As it happens, the AK government has done more than almost any of its predecessors to give a better deal to Turkey's Kurds, who make up 14% of the population, most of them living in the country's poor south-east. But Kurdish PKK guerrillas stepped up their terrorist campaign earlier this year and the precarious ceasefire that is now in force may not last.

A second is that the economy, for all its recent strength, is still a work in progress. Inflation is not wholly defeated, the current-account deficit is large and Turkey's competitiveness in manufacturing is a matter for concern. Worst of all, unemployment is distressingly high, especially in the east and south-east and among women and the young. These failings will be analysed in more detail in the next section of this report.

A rapidly growing country inevitably has social problems to contend with as well. On the UN Development Programme's human-development index, a general measure of wellbeing, Turkey comes below Russia, Albania and Romania. Despite some excellent universities and hospitals, the quality of education and health care is patchy and uneven. Moreover, corruption is a huge problem. The corruption rankings of Transparency International, a Berlin-based lobby group, put Turkey behind South Africa and on a par with Cuba.

And then there is Turkish politics. The AK government has done well since it took office in 2002. The party dislikes labels, yet the term "mildly Islamist" suits it, as does "conservative". Mr Erdogan himself likens AK to a European Christian Democratic party. There is no longer a serious danger of a military coup. But despite his victory in September's referendum, Mr Erdogan faces a tricky election next summer. His authoritarian streak has attracted much criticism, and the main opposition party has begun to revitalise itself under a new leader. The AK party may yet win another majority, but there is also a chance that it will fall short and Turkey could find itself with a coalition government for the first time since 2002.

Turkey's experience of the past few decades suggests that the country needs firm external anchors to stop it drifting into dangerous waters. It has depended on two in particular. The first is the IMF: whenever the economy has veered off course, the IMF has been called in to drag it back. The most dramatic instance came after the crisis of 2001, when Kemal Dervis took over as finance minister and, with the help of the IMF, devised the fiscal and monetary framework that was largely responsible for the country's subsequent success.

The second and even weightier anchor has been the lure of EU membership. Whereas the IMF has steered only Turkey's macroeconomic policy, the EU has been the catalyst for an entire programme of social and economic reforms. Even before membership talks began in October 2005, the EU was able to persuade Turkey to adopt a wide-ranging liberal, free-market and democratic agenda.

The problem with both anchors is that over the past five years their pull has got much weaker. A healthier economy and stronger public finances have enabled Turkey to jettison its IMF programme (though some ministers tried to keep it). In the run-up to a possibly tight election next year, this may make it easy for the government to offer irresponsible fiscal inducements that could jeopardise the long-term health of the public finances.

Even more disturbing is the loss of EU influence. Few people, either in Brussels or in Ankara, any longer believe that Turkish membership will come about in the foreseeable future. The negotiations have progressed agonisingly slowly. Over half the chapters in the accession talks are now blocked, many because of an unresolved dispute over Cyprus. Political leaders as well as voters in France, Germany, Austria and the Netherlands have made it clear that they do not want Turkey in the EU.

So it is not surprising that many Turks consider that the EU anchor has lost its purchase. The country's political leaders these days speak less and less about their EU aspirations. Why should Turkey implement difficult reforms to meet European standards, some ask plaintively, if EU membership will not be forthcoming in return? Indeed, why continue on the path of free-market liberal democracy at all?

That is the kernel of Turkey's difficulties today. So long as it could rely on the IMF's tutelage and had a real hope of EU membership, its course was fixed. But with the IMF gone and the EU receding over the horizon, Turkey needs new anchors. The best place to start looking is the economy-for without continuing economic success, not much else will go right.


FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.