Turkey:
The Financial Crisis Sparks off an Economic and Social Crisis

May 6, 2001

The following article was translated from an article appearing in the May-June issue of Lutte de Classe, the political magazine of Lutte Ouvrière, the French Trotskyist organization with whom we share political agreement.

Toward the end of February, a serious altercation between Prime Minister Bülent Ecevit and President Ahmet Necdet Sezer ignited a financial crisis in Turkey. Within hours, several billion dollars left the country, even though the central bank attempted to stop the outflow by offering exorbitant interest rates. The currency was allowed to float, plunging the country into a financial crisis which rapidly turned into an economic and social crisis.

Embezzlement, Corruption and Scandals

Of course the dispute between the Prime Minister and the President was merely the detonator of a crisis which had been threatening for months. Ahmet Necdet Sezer, the president of the High Court who had been elected president of the republic in May 2000, came in supposedly to fight against the embezzlement, corruption and other dubious practices which had plagued the Turkish regime, trying to salvage its image. But by the end of 2000 and the start of 2001, new scandals were erupting on an unprecedented scale, in a country where scandals are commonplace. The equivalent of billions of dollars were found to have been embezzled from the state by ex-ministers, people close to the central government and high ranking civil servants.

On the 8th of January the daily newspaper Milliyet reported that two businessmen had defrauded the state, obtaining subsidies totaling 1.7 billion dollars for fictitious exports. Among those implicated in this affair were ex-minister and businessman Cavit Çaglar, a protégé of former President Demirel; Murat Demirel, the former president’s cousin; and another well-known businessman, Hayyam Garipoglu.

On January 14th, the press announced that five of the highest ranking officials of TEAS (the electricity board) including another former government minister, had been indicted for corruption. Among other charges, they were accused of having embezzled 800 million dollars, during the construction of an electricity-generating plant.

Eight banks then declared themselves insolvent: Interbank, owned by Cavit Çaglar; Egebank, owned by Murat Demirel; Sümerbank, whose vaults had been filled with state finances before being privatized (supposedly because it was mismanaged by the state) and which now belonged to Hayyam Garipoglu, also named in the electric power scandal; as well as Bank Ekspres and Yurtbank. In fact the owners of these banks, aided and abetted by corrupt businessmen and high-ranking state officials, emptied the coffers of their own banks in order to declare themselves insolvent!

On behalf of the state, the Finance Minister intervened to guarantee the banks’ losses under the pretext of preventing "a serious economic crisis." Eight billion dollars were reimbursed, though according to some sources, the amount was 10 billion. In other words, these swindlers, closely linked to the state, stole the savings of hundreds of thousands of people and were then reimbursed by the state with taxpayers’ money!

Add to this all the obvious links between the state, corrupt businessmen and the mafia. In May 2000, for example, when a car crash killed "businessman" Melik Giray, a mafia godfather who had a contract to supply several prisons, one of the passengers in his car turned out to be the Attorney General of the DGM (the Special State Court). This high ranking dignitary survived the accident with just a few broken bones, but the discovery of his suspicious friendship with the dead "Godfather" obliged the state to get rid of him.

This was a reminder of the Susurluk affair, in November 1996, when another car accident brought to light similar links between certain politicians, far right-wing assassins, mafiosi and police chiefs. The investigation at that time led to a dead-end.

Withdrawal of Capital and Devaluation

It was in this context marked by bankruptcy, corruption, discredit of the state apparatus and blurred boundaries between businessmen and the mafia that the new president accused the prime minister of having hindered an investigation into the dealings of these failed and corrupt bankers and of having done nothing to overcome the generalized corruption. The accusation, which was undoubtedly well-founded, was enough to trigger financial panic, and this rapidly led to the devaluation of the Turkish lira. Between the 19th of February and the first of April 2001, the lira lost half of its value, with catastrophic consequences for the population.

In fact, apart from certain aspects of the domestic situation in Turkey, this financial crisis closely parallels the financial crises which had earlier struck countries of Southeast Asia, Latin America and Russia, with the population paying the price in each case for the speculative ups and downs of the international financial markets.

Under pressure from the IMF, Turkey had adopted an anti-inflation plan, aimed at setting up a fixed parity between the dollar and the Turkish lira, at the end of 1999. According to the government, this was to put an end to the chronic inflation (running at an annual rate of 100%) that had afflicted the country for several years. Indeed, over a 10-year period, the value of the Turkish lira had fallen to less than 1/200th of its original value, leading to the issuing of ten- million lira banknotes, which today are each worth less than one dollar. To achieve its aims, of course, the government relied on austerity measures which it imposed on the working class, starting with public sector workers who, despite their repeated demonstrations, were awarded a paltry 25% pay rise, when annual inflation was still nearly 100%.

Proposals for austerity and exhortations to sacrifice for the common good made little impression on the corrupt businessmen and bankers, who remained unconcerned by such appeals to "good citizenship." Neither the mounting state budget deficit nor the foreign debt which was already 114 billion dollars (70% of Turkey’s GDP) showed any sign of letting up. The international financial markets, which the Turkish Central Bank had always relied on for loans to pay off its debts, even at astronomical interest rates, this time ignored all appeals for help. Given the general lack of confidence in the ability of Turkish authorities to maintain parity with the dollar, capital began to leave the country. After a first financial shock in November 2000 the crisis of February 19th, 2001 transformed this flight into panic. Rapidly depleting the Central Bank’s reserves, the government was forced to give up trying to support its own currency; it had to let it float.

The Population Held Ransom

Of course, the corrupt bankers, international capitalists and rich mafiosi managed to convert their assets into dollars or euros just in time. It’s the Turkish population that has to pay the price for this gigantic swindle. Between February 19th and May 5th, the Turkish lira lost 42% of its value. In just a few weeks, the prices of imported products went sky-high. The price of a bottle of gas, used by most families for cooking, increased from 5 million liras on February 19th to 12 million on May 5th. Other price increases followed, from public transport to agricultural products. Inflation, which had barely begun to slow, shot up once more.

In the meantime, the banking crisis led to a rapid escalation of the economic crisis. The middle classes, the owners of small businesses and especially small shopkeepers who had previously taken out loans in dollars were suddenly faced with repayments which had increased by 50 or 100%. Banks facing bankruptcy refused to extend more loans. Business contracted, and thousands of small companies closed down, laying off their workers, often without even paying them the wages they were owed. This happened especially in the textile industry, one of Turkey’s traditional export sectors on which millions of people depend for their livelihoods. Hundreds of thousands throughout the country have lost their jobs.

At the beginning of March, a few days after the start of the crisis, Ecevit’s government had to accept Kemal Dervio, a former vice-president of the World Bank, as "super minister" for the economy. The International Monetary Fund (IMF) required his nomination as a condition for granting Turkey a new 12 billion dollar loan. According to the majority of financial experts, Turkey needs almost 40 billion dollars just to make up the losses of the state banking system. But before handing over such an amount, the IMF is undoubtedly waiting to see whether Kemal Dervio will be able to force through his "recovery plan." There is no question what that "recovery plan" will be: Dervio, "super minister" or not, will not lay a finger on the capital of the crooks and mafiosi, who have accomplices at every level of the state apparatus and who have, of course, sheltered all their earnings in foreign banks. This can only mean that he will try to impose vicious austerity measures on the already poverty-stricken population.

The Discredited Government

The head of the government, Bülent Ecevit, a member of the DSP a "social democratic" party with nationalist demagogy at one time claimed to be a champion of honesty and integrity. But the coalition government which he formed with the ANAP, a right-wing liberal party, and the MHP, a far right nationalist party, has been involved in so many scandals that it is now totally discredited. The economic crisis is only the latest in a series of crises, including the earthquake in August 1999, during which the population was able to measure the true extent of the incompetence of the state apparatus and the government. The government’s bragging when it captured the Kurdish PKK leader, Abdullah Öcalan, and its claim to have put an end to the Kurdish guerilla war which he had led, carried no weight. Nationalist slogans and patriotic chauvinism do not make the population forget the harsh reality of everyday life.

Today, this worn-out government has no choice but to allow Kemal Dervio to act, while waiting for the IMF subsidies. As for the army, it continues to intervene directly in government affairs through the National Security Council (MGK), whose members include representatives of the army Chief of Staff, the Prime Minister and the President. But for the time being, it also prefers to stay in the background, reserving a coup-de-etat, like the one it carried out in September 1980, as a last resort. But how long can this situation last, given the depth of the crisis into which the country is sliding?

Until now, the most spectacular reactions have come from the small business owners, notably the small shopkeepers, who denounced the government and called for it to step down. The trade union organizations organized only a few token demonstrations. Obviously, these highly bureaucratic organizations, which have always been ready to collaborate with the bosses and government, are incapable of proposing a fighting program that would allow the working class and the poor to refuse to pay for this enormous swindle. Thus, it has been left to the Islamic party which had been forced out of the government and banned several years ago, only to resurface as the "Virtue Party" (Fazilet Partisi) to carry out a high-profile campaign against the thieves and crooks who are robbing the population. This campaign could benefit them politically.

While all of this has been going on, the far-left prisoners in the country’s prisons have been continuing hunger strikes in protest against their conditions of detention. After December 19th, when the army stormed a prison and killed 30 prisoners, more hunger strikers have died every week. Unfortunately, this has been viewed with total indifference abroad. European leaders, who are often ready to give others sermons on "democracy" have been very careful in this situation not to show the slightest sign of disapproval toward the Turkish regime. And inside Turkey itself, the hunger strikers’ cause appears to be very removed from the preoccupations of the population at a time when it is so severely afflicted by the crisis.

As for the regime, which is incapable of bringing the crooked bankers and the mafiosi under control, allowing defenseless hunger strikers to die is a convenient way to show strength and determination. It can use this as a threat against the whole population, to demonstrate that the state will stop at nothing to impose its policies.

But this corrupt state, with its discredited government, may be a bit too confident in its own power. The Turkish working class is strong and able to fight. Over the past years it has shown that it is able to act against this unscrupulous police state. The IMF’s decrees and Kemal Dervio’s recovery plans could come up against strong resistance. We can only hope that the workers in Turkey will rapidly prepare themselves to fight to impose their right for a decent livelihood, against the demands of the international speculators, the greed of the bourgeoisie and corrupt bankers, and against the cynical and despotic regime which protects them.