Turkey’s Economic Crisis:
Squeezing the Working Class to Pay off the Big Banks

Mar 5, 2001

In the last week of February, Turkey plunged into a serious financial crisis. As soon as the news of a falling out between prime minister Bulent Ecevit and president Ahmet Necdet Sezer was publicized, investors started to sell massive amounts of the Turkish currency, the lira, on the stock market. Normally this would bring the value of the lira down. But the government, following a plan laid out by the International Monetary Fund (IMF), tried to keep the value of the lira fixed against the U.S. dollar. This, in turn, caused interest rates to skyrocket, rising to as high as 5,000% overnight. When the government finally allowed the lira to float on the market, it immediately fell 36% against the dollar, before rising again slightly.

When the storm was finally over, the lira had been devalued 26%. But the crisis is far from over. Interest rates have fallen back, making borrowing money easier again, but Turkish banks now face another problem: paying debts to foreign, that is, U.S. and European banks, when these payments have automatically risen with the devaluation of the Turkish currency. One bank has already been declared bankrupt and was taken over by the government agency in charge of bailing out insolvent banks. The government has asked the IMF and World Bank, that is U.S. and European banks, for 25 billion dollars in emergency loans.

If the IMF extends new loans, which is likely, it would be the second time within three months. Last December, after a similar crisis, the Turkish government had bailed out 11 banks and received 11 billion dollars in loans from the IMF.

For the past several years, the Turkish government and banks have been having difficulty raising the money needed to make the interest payments on their debt to U.S. and European banks (interest payments take up as much as 40% of the government’s expenditures).

In late 1999, acting as a collection agency for the U.S. and European banks, which were worried about collecting their interest payments, the IMF offered the Turkish government a socalled "disinflation program." Until last November, the IMF said that the program was working. But when a big Turkish bank failed, investors took their money out of Turkey in a panic.

This latest crisis has now brought Turkey, and the IMF, back to square one. For decades now, the IMF has come up with one "rescue program" after another for not only Turkey, but practically every single underdeveloped country on the face of the planet. While being advertised every time as new, improved plans, these IMF programs always amount to the same old recipe: wage freezes, cuts in social programs, privatization of staterun enterprises and new loans to pay off the interest on old loans. Of course, these new loans only cause the debt to balloon up, taking up more and more of the state budget and driving these countries deeper into a vicious cycle.

The situation has spiraled down more rapidly in the last decade as a result of massive speculation on global financial markets. Big U.S. and European banks, the same ones that extend loans and offer "rescue plans" to underdeveloped countries, buy and sell large amounts of currency to make quick and hefty profits. Because the volume of this speculation is so large, it can easily send not only a small, but a middlesized economy (like Turkey now or Thailand four years ago) into total collapse. How hypocritical those "experts" in the news media are when they blame these endlessly recurring crises on government "mismanagement" and "corruption" in the underdeveloped countries!

The price of the astronomical profits made by banks and financial interests in the imperialist countries, which collect interest and engage in vast speculative maneuvers, is paid by the working class and poor of the poor countries. The 26% devaluation of the Turkish lira means an automatic cut in the real wages of Turkish workers. The government has already announced a 10% increase in gasoline and natural gas prices, which of course will lead to an increase in the prices of many other goods. A car company has already laid off 150 workers, giving the lira’s drop as a reason; more layoffs are expected in the near future. For those still working, the bosses will certainly try to use the economic crisis as an excuse to cut actual wages. At least a quarter of the work force already works for the minimum wage, which was worth about 130 dollars a month before the latest devaluation. And in line with the IMF program, the government is trying to privatize the state-run telephone and airline companies, which is likely to lead to more layoffs.

Last fall, the government announced that it will give its employees only a 10% raise in 2001, with the inflation rate already running at 55%. In December, over one million public sector workers, including municipal and health care workers and teachers, staged an illegal oneday general strike in protest of the 10% raise. Many workers supported the strike by not sending their children to school. The latest devaluation also was met with spontaneous demonstrations in many cities.

It remains to be seen whether these protests will lead to a massive, organized response by the Turkish working class against these increased attacks and exploitation. In any event, that’s the only defense workers will have.