June 26, 2018 / 2:10 PM / 3 months ago

Breakingviews - Hadas: Turkish strongman overcomes mixed economics

LONDON (Reuters Breakingviews) - Tayyip Erdogan has done what all authoritarian leaders want to do – he has won an unfair election. His Sunday victory in Turkey’s presidential ballot, under the new constitution he devised, makes him a near-absolute leader. Of course, he still cannot overpower global financial markets or economic reality. But the economy is a secondary concern to him – as it is to other “will of the people” leaders.

Turkish President Tayyip Erdogan greets his supporters from the balcony of his ruling AK Party headquarters in Ankara, Turkey, early June 25, 2018. Kayhan Ozer/Presidential Palace/Handout via Reuters.

Erdogan’s opponents complain that the victory was enhanced by biased media and the imprisonment of a leading rival. That misses the point. In the authoritarian political ideology, media manipulation helps the people recognise their true will.

Who are the people? When would-be leaders were still outsiders, such as candidates Donald Trump in the United States and Matteo Salvini in Italy, they claimed to speak for a disenfranchised core of the population. The values of the group have not been respected and their social and economic prospects have been thwarted. They threaten revolution.

When today’s authoritarians reach power, though, the revolutionary force is mostly felt by opponents of the new regime, who are marginalised and sometimes persecuted. The economic changes have been relatively modest – some goodies for the leaders’ core supporters and enrichment for the new insiders and their cronies. The main change is the hysterical promotion of loyalty to the new leader, who will make the country great again.

Erdogan has been in power for 15 years – first as prime minister, then as president. His longevity offers clues about what to expect from other would-be strongmen. His policies promote the interests of the loyal business elite, the rural poor and the pious. Meanwhile his national and personal aggrandisement is as relentless as his prosecutions and purges. He is in the same mould as Russia’s Vladimir Putin and Hungary’s Viktor Orban. President Trump has similar instincts. His Chinese counterpart Xi Jinping is more opposed to corruption, but predominantly that of his opponents.

The Turkish election took place before voters felt the full inflationary pain from the 10 percent decline in the lira against the euro since the beginning of May. Some of Erdogan’s critics, especially the foreign ones, think he pushed the date forward because he was worried about running when the economy was weaker. That is possible, but Erdogan treats economic concerns as secondary. Prosperity – especially that of his supporters – is important, but only because it helps create a strong and unified people.

It is much the same for other “will of the people” leaders. Even in China, where rising incomes are clearly a political imperative, Xi seems to see steady and rapid GDP growth primarily as a means to the higher ends of restoring China’s greatness and maintaining the ruling Communist party’s firm control.

The secondary importance of economics explains the frequency of apparently counterproductive policies. These include Erdogan’s hatred of what he calls the “interest rate lobby”, which he blames for keeping borrowing costs high. The antipathy is economically irrational, but fits neatly with his predominant vision of a globally respected Turkey. The result is the opposite of what Erdogan wants. His indifference to the country’s large current account deficit and reckless lending leaves it at the mercy of foreign financiers.

Similarly, if durable GDP growth were the goal, the Erdogan government would not have poured vast sums into gigantic public works projects. However, national grandeur and rewarding loyal construction are higher priorities. The thousand-room Erdogan presidential palace, the new Bosphorus bridge and a planned gargantuan new airport in Istanbul fit perfectly with that vision.

It is much the same with the economic policies of other nationalist leaders. Trump’s tax cuts and tariffs please his supporters, who like the president’s America-first and government-last agendas. Putin’s Russia puts up with economically painful sanctions. Orban’s Hungary alienates its EU economic benefactors. In Britain, advocates of Brexit dismiss economists or business leaders who warn of the costs of leaving the European Union.

None of those policies make economic sense, but the leaders all consider any hit to prosperity to be a price worth paying for demonstrating national greatness. And they are probably right not to be very concerned about a political backlash. Resistance to self-harming economic policies has so far mostly been muted. Economic issues did not play a big role in the campaign of Muharram Ince, Erdogan’s leading opponent.

The indifference might disappear if policies cause grievous economic pain. Revulsion is far from a sure thing, though. Clever autocrats will ensure that their political enemies suffer most of the pain. Helped by state-controlled media, they will blame someone else – despised migrants, foreign conspirators and domestic traitors. The people will mostly believe their leaders.

It is time to abandon the notion that economic concerns explain the rise of authoritarian and nationalist governments around the world. After all, this ideology appeals to relative economic winners as well as losers, and it is thriving in many different economic environments – from fast-growing Poland, to slow-growing Philippines and already rich Austria.

All things being equal, most people certainly prefer to be richer rather than poorer. However, supporters of the “will of the people” often care more about national identity than about money. Mixed economic results will not be sufficient to displace authoritarian leaders

Breakingviews

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