Those most likely to suffer from Turkey’s unfolding financial and economic crisis are the working class as always, as investment dries up, and the country’s confected boom starts to bust. So one can permit oneself only a momentary satisfaction at that grinning bastard Recep Erdoğan being landed right in it, a mere months after engineering his own election as a virtual dictator.

The Turkish lira has fallen 45% against the dollar over the past few months, leaving Turkish borrowers with newly onerous dollar-denominated loans; inflation is threatening to break out, heading towards 30%, and the country’s much-vaunted neoliberal growth is being exposed as a bubble, based on heavy borrowing and overheated construction.

For years Erdoğan and the Justice and Development Party (AKP) have been using this boom — annual growth rates of 6-10% — to guarantee support for the other side of his politics, a return to Islamist, and Ottoman, nationalism, and an authoritarian state, locking up tens of thousands of journalists, academics and activists. With Erodgan and the AKP, Thatcherism came to Turkey; by detaching Islamist politics from its anti-modernist tendencies, and fusing it with a neoliberal program, Erdoğan had managed to leap ahead of Turkish nationalists, who have never found a way to repurpose Ataturkian nationalism – which, at its height, had a Turkish everything, from its own state-made Coca-Cola equivalent, to a specific Turkish keyboard for typewriters – for the current era.

The limited consent that Erdoğan gained for his political-cultural program – especially in the more liberal west of the nation – will now come under some heat; one reason perhaps why Qatar is willing to stump up $15 billion in sovereign wealth funds to keep the show on the road.

The ride down the other side of Mt Ararat might now be steep. For years, Erdoğan has been trying to position Turkey as the major regional power, its “natural” position, explicitly reviving the notion of an Ottoman sphere of influence. That is now revealed as hopelessly overextended and overambitious. The Trump administration has been clipping the country’s wings with heavy tariffs on aluminium and steel imports, ostensibly as a sanction for the detention of a US evangelical pastor, charged with proselytising, but really to assert its dominance. Erdoğan has complained in the past that this is no way to treat an ally; the response to that would be that Turkey has been letting Islamic State and other nasties operate with impunity across the border with Syria, and actively supporting some of them.

Erdoğan, so far, is avoiding a trip to the IMF, a move which would count as a rank humiliation for him, tarnish his mystique, and force him to make recession-inducing measures, thus making him the Sultan of swingeing cuts. But the longer he delays it, on the hope that Muslim sovereign wealth will bail him out, the more likely that a reversal will turn into a crisis.

The proximate knock-on effects would be to Italian and Spanish banks, which have a historic relationship with Turkey; and then to the Turkic countries to the east, which in turn depend on Turkish banks for investment.

But as to wider implications, Turkey is more symptom and signifier than cause; the latest miracle nation to come a cropper from the fact that rapid development – when conducted in wholly neoliberal terms – is always a Ponzi scheme, for which the payment comes due sooner rather than later. The only really important question that this raises for us is whether China is an authoritarian state capitalist/socialist country with a free-market sector; or whether it is deep down a neoliberal entity with a statist overlay. China is either no Turkey or a total turkey, and it’s going to be fun to find out which.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey