Lira Lessons for Democracies: Respect Institutions or Else
What lessons can democracies learn from unprecedented decline of Lira, amid recent political developments in Turkey?
Turkish currency Lira fell nearly 40 percent in 2018. The currency has been in free fall yet again, following the announcement of results of municipal elections in Turkey last month.
But why should a country’s sovereign currency fall because of municipal election results?
CNBC reports that, “Turkey's municipal elections saw Opposition candidate Ekrem Imamoglu beat the mayoral candidate from President Recep Erdogan's ruling AK Party – which had held Istanbul for the past 25 years – by 14,000 votes, according to the nation's High Election Board. The AK Party alleged irregularities in the vote count for the city of more than 10 million voters, ultimately winning its appeal for a new election. Former Prime Minister Binali Yildirim will again run as the AK Party's candidate for mayor.”
Incidentally, Erdogan was Istanbul mayor between 1994 to 1998. And his governance model as mayor made him immensely popular in Turkey.
Election Watchdog Ordered Re-poll After Ruling Party Lost
A ruling party for nearly two decades accusing the Opposition of election irregularities. And the High Election Board, counterpart of India’s Election Commission, agreeing to nullify the results altogether!
This means that the so-called independent institutions are dancing to the tunes of the ‘supreme leader’... Sounds familiar.
Opposition parties were blamed for irregularities despite rules of the game blatantly favouring the ruling dispensation. A Brookings paper says that, “although Turkey had a record of free and fair elections since 1950, there have been questions about the conduct of recent polls.”
“In the run-up to the June and November 2015 general elections, Erdogan disregarded constitutional stipulations against partisan activity by a sitting president and the Opposition complained about limited access to state media (as well as general media, mostly controlled by the government). This problem persisted before the April 2017 referendum, as government use of state resources led the Organisation for Security and Cooperation in Europe (OSCE) to report that ‘the line between State and party (had become) blurred’,” the paper added.
Municipal Elections Fought on Issue of National Security
Turkey changed its election bylaws recently, allowing unstamped ballots to be considered valid and permitting relocation of ballot boxes.
Do you expect these changes to suit anyone else other than the ruling party?
Yet, Erdogan’s AK party lost the municipal poll – in the politically significant Istanbul – and the election watchdog was subsequently instructed to order a re-poll!
It was like a case of ‘heads I win, tails you lose’. For Erdogan, it was like “I alone can campaign. I am the only issue and you can vote against me at your own grave risk.”
Analysing the verdict, another Brookings paper argues: “Erdogan had turned these local elections into a national referendum on national security and survival, with his alarmist and bellicose discourse of anti-Western and anti-Kurdish nationalism. He went as far as labelling his opponents ‘sympathisers of terrorism’. Such tactics badly misfired.”
“Rather than Erdogan’s imaginary enemies, Turkish voters in almost all major cities preferred to focus on something much more concrete and visible: inflation, unemployment, recession and a major drop in standards of living. In short, that adage, ‘it’s the economy, stupid’, proved right one more time,” the paper added.
Erdogan is reported to have shown footage of the recent New Zealand terror attack in his election rallies, claiming that he and Turkey are also potential targets. Hence, his exhortation to vote in the name of national security did not work.
Institutional Breakdown Having Dreadful Impact on People’s Lives
This is not the only instance of a powerful democratic institution swinging to the tunes of Erdogan and his party. The country’s central bank is not independently allowed to re-calibrate interest rates to stem the slide of Turkish Lira and check the menacing rise of inflation.
And the media is either government owned or controlled. There are reports of cronies buying out independent media houses. Civil rights activists have either been forced to flee or put in jails. There is widespread censorship of content on the web. All major appointments, including those of judges, are done by the supreme leader.
The impact has been devastating. Here is a snapshot:
- The rate of inflation has been close to an alarming 20 percent for months and there is no respite in sight.
- Turkish Lira, which was close to 2.15-a-US dollar in 2014, has crossed the 6-Lira-to-a-dollar mark. Such an accelerated depreciation of a leading currency has been unprecedented. The sharp depreciation of Lira is one of the reasons for high inflation, as it pushes up the prices of all imports.
- While around 1,000 millionaires left the country in 2015, this figure rose to nearly 6,000 by the end of 2016, representing an unprecedented 500 percent increase from the year before, as per a report in Time.
- The country’s economy is in recession and investors, local or global, are unwilling to put their money to work in the country. Erdogan blames outside actors for the plight.
- The CNBC report has quoted an analyst as saying that the latest episode of election watchdog succumbing to the pressure of the ruling party is bound to renew “concerns regarding independence and credibility of Turkey’s institutions.”
Do we need more to remind democracies the world over that the health of institutions is directly related to the wellbeing of a country?
The perception of compromised institutions rattles the international community. And, in a highly globalised world, is it possible to shun all outsiders as enemies and yet grow and prosper?
Perception management can possibly sway the sentiments inside. But can it be as effective when it comes to managing outside observers? It does not seem to be the case for Turkey.
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