The President of Turkey, Recep Tayyip Erdogan appointed his son-in-law Berat Albayrak as the Treasury and Finance Minister shortly after he retained his office in the general elections in June 2018. On 10th August 2018, Albayrak held a press meeting with the heads of the prominent industrialist and capitalist groups as he revealed the ‘new economic model’ which will employ cooperation with ‘all national and international stakeholders’ and will bring a ‘decisive’ approach for maintaining the Central Bank’s independence. Perhaps it was because of Erdogan’s unorthodox views on interest rates and his increasing authoritarianism, the financial markets did not take this promise seriously as on the very same day, the value of Turkish Lira fell 10 percent against foreign currencies, marking the US Dollar six times more valuable than Turkish Lira, for the first time in history. Almost one year later, following an epic defeat in the local elections and the losing of Istanbul with a greater margin in the re-run of the mayoral elections, Erdogan sacked the head of the Central Bank over the dispute on interest rates which raised concerns over Central Bank independence once again. The violation of Central Bank independence illustrates an ongoing pattern that led to the crisis in the first place (Akcay and Güngen 2019). The currency and debt crisis of 2018 and recent developments in the finance and banking sector in 2019 brought the political economy of Islamic-neoliberalism in Turkey under scrutiny as the country represents one of the most dynamic emerging economies in the periphery in the age of global capitalism.
As argued in Galip L. Yalman, Thomas Marois, and Ali Rıza Güngen’s edited volume, The Political Economy of Financial Transformation in Turkey, a specific focus on financialization in the global South is crucial not only because neoliberal globalization is related with financialization to account for the transformation of capitalism at the level of both the nation-state and the global economy, but also that peripheral financialization is divergent from global financial transformation in general. Turkey’s financial transformation under neoliberal globalization can be identified as an example of “variegated capitalism”, as it demonstrates “processes and forms of uneven development within, and beyond, late capitalism” (Peck and Theodore 2007: 763). The ‘variegated’ nature of the political economy of financial transformation in Turkey indicates an increasingly consolidated authoritarian rule (e.g. the centralization of decision-making), what Ian Bruff and Cemal Burak Tansel (2018) call “authoritarian neoliberalism”.
The Political Economy of Financial Transformation in Turkey does not only collectively analyze how the transformation of finance-led capitalism in Turkey has been undertaken since the early 2000s with a critical political economy perspective by ten political economists, it also provides a historical analysis of the making of the Turkish financial system between 1923-1980 and the neoliberal transformation of state and market between 1980-2000. The anthology critically examines Turkey’s quantitatively significant economic growth via financial flows and investment on the one hand; the qualitatively important institutional restructuring by the state around financial necessities which determinedly creates an exploitative and unequal social structure that portrays the overall features of neoliberal financialization in the periphery, on the other. The editors argue that despite “the predominance of liberal-individualist and statist-institutionalist approaches and schools of political economy in general, and the hegemony of neoliberalism in the discourse, as well as in policymaking in particular, Turkey’s financial transformation has been under-theorized and empirically under-explored from a critical political economy perspective” (p. 2). As an emerging economy in the global South, it is imperative to analyze the changes in the banking and financial sector in Turkey under the Islamist AKP rule from a critical political economy perspective because, first, this transformation is not a class-neutral process, therefore, it was determined by the interests of the main large capital groups rather than the interests of the poor, and wage labor in Turkey; and, second, neither the reasons nor the results of these changes are limited to Turkey’s national borders that is to say they are determined by Turkey’s integration to the global financial system as a peripheral emerging economy, rather than simply by its domestic political economy.
In the introduction chapter, the editors engage with the contemporary debates on financialization and banking, especially in the global South. They argue that there is a “need for a conceptual framework to come to terms with historically distinct processes of financial transformation in general, in the emerging capitalist societies of the global South in particular” as financialization has become a catch-all notion to define a multiplicity of divergent experiences (p. 3). Following an extensive literature review on financialization, they also provide a useful review of alternatives to neoliberal financial transformation, or in other words, de-financialization. In the review, they identify four different approaches as alternatives to neoliberal financial transformation. First, mainstream alternatives where intensifying financial transformation is suggested. Second, heterodox and new developmental alternatives in which mitigating excesses of financial transformation is offered. Third, critical and Marxian-inspired alternatives which aim to transcend financial oppression. Finally, fourth, contemporary alternatives where financial inclusion in the case of Turkey is discussed.
It is overarchingly argued in the book’s narrative that the historical trajectory of Turkey’s financial transformation is maintained as ‘bank-based’ but ‘market-oriented’. To start with, the book highlights the fact that “the genesis of the financial transformation in Turkey could be traced back to the early republican era” (p. 10). It is clear to see the developmental objectives in the early republican era as Turkey inherited a relatively weak national financial structure from the Ottoman Empire. New institutional arrangements were employed later in the 1960s for the development of import-substituting industrialization to help the emergence of a national bourgeoisie. Following the coup in 1980, Turkey was ready to transform its state-market structure accordingly with global capitalism, in other words, neoliberalism. Liberalization of the Turkish finance and banking sector had come with neoliberal market-oriented developments. After completing the historical overview of the finance and banking sector in Turkey in two periods, the book provides an analysis of the most recent three crises in Turkey: 1994, 2001, 2008-9. This chapter empirically demonstrates that the 1994 and 2001 crises were significantly similar whereas the global financial crisis of 2008-09 was distinct from both of them as Turkey’s financial sector proved to be relatively resilient. The next chapter focuses on the transformation of the state financial apparatus in Turkey since 2001. It is argued that “Turkish neoliberalism carries all the general characteristics of an attack on popular and working class aspirations by capital and by neoliberal advocates … [and it] is also differentiated by the historical specificity of capitalism in Turkey, its class- and socially divided society, and its integration into the world market” (p. 108). Therefore, the consolidation of neoliberalism in Turkey required a more powerful state financial apparatus hence the internal institutional restructuring and the strengthening of the state’s material capacity to manage finance in neoliberal capitalism. The following chapter takes on the neoliberal restructuring of banking in Turkey since 2001. The authors of the chapter argue that regardless of the significant changes in market finance, the finance sector in Turkey remains predominantly bank-based and all banks in Turkey have transformed to be assertively market-oriented and return-driven to maintain neoliberal development schemes and this is not a socially neutral process as “the political and economic changes have come at the expense of Turkey’s working classes, but to the benefit of capital and Turkey’s governing neoliberal élites” (p. 137). The neoliberal emergence of market finance in Turkey is provided in the next chapter where it is argued that “market finance has been relatively insignificant compared to the role of banks such that the Turkish financial sector should still be grasped as dominated by banks… [and] … there are significant social and economic forces pushing for financial market deepening and the creation of alternative financing mechanisms in Turkey” (p. 163).
The book continues with an analysis of the profitability and mergers & acquisitions (M&As) in the Turkish corporate sector in the era of financialization in the next chapter. The financial earnings and M&As are two facets of the financialization of the corporate sector in Turkey as it is evident that “the importance of financial channels as a source of income has grown since the 1980s… [and] … the pace of [M&As] has rapidly increased, especially since 2005, demonstrating that businesses in Turkey have themselves become more tradeable entities” (p. 184). The transformation of small and medium-sized enterprise (SMEs) finance in Turkey occupies the focus of the following chapter. It is argued that “in order to integrate the SMEs into their sectoral networks, the Turkish state, as the risk-taker of last resort, provided financial support for the SMEs [which is] not incompatible with the modalities of a neoliberal capital accumulation strategy” (p. 221-2). The next chapter investigates the transformation of housing finance in Turkey. It is safe to argue that the construction sector has been allocated a pivotal role in economic growth in Turkey since the 1960s. Especially since 2001, Turkey has been one of the fastest-developing real estate markets not only with large-scale housing projects with shopping malls and office developments but also with the housing market and its financing. The transformation of housing finance has increased three dynamics in Turkey: “the need for affordable housing for low-income households; the increased entry of global investors into the Turkish real estate market; and legislative reforms” (p. 243). Finally, the last chapter in the book analyzes the financialization of household debt and retail banking activities in Turkey. This chapter provides an assessment of “the evolving nature of the relationship between the commercial banks and individuals/households” (p. 269).
At the time when this review was being authored, Ali Babacan, one of the prominent founding members of the AKP who served as the Minister of Economic Affairs between 2002-7, and as Deputy Prime Minister responsible for the economy between 2009-2015 resigned from his party to establish a new one. He cited ‘deep differences’ with the current regime, hence the fact that he resigned two days after Erdogan fired the Central Bank governor. Babacan was the chief director of the economy before the “good AKP [went] bad” (Erol, 2018: 2). Following the epic defeat in the local elections, arguably as a result of the currency and debt crisis of 2018, Babacan has become a central figure for those looking for someone who could replace Erdogan and bring the AKP’s ‘golden days’ back, when the country was ‘democratic’ and the economy was ‘growing’. However, this book evidently illustrates that it is problematic to identify a “clear-cut temporal disassociation of AKP’s ‘democratic’ and ‘authoritarian’ phases” (Tansel, 2018: 198) as the economic ‘growth’ under the ‘democratic’ AKP clearly favored the interests of capital groups above the interests of wage-labour. The financialization aspect of neoliberalism under the Islamist AKP rule demonstrates similarities with the authoritarian economy management between 1980-2000, in terms of creating unequally constructed society.
Overall, published in the Europa Perspectives: Emerging Economics Book Series, The Political Economy of Financial Transformation in Turkey is a significant contribution to the debates on the nature of the financial transformation in the global South under neoliberal globalization. With its excellent theoretical and empirical contribution to an area that is currently under-theorized and empirically under-explored from a critical political economy perspective, this book is noteworthy in the topics of peripheral financialization and banking, the political economy of global South (particularly Turkey), and international political economy.
Akcay, Umit and Güngen, Ali Riza. 2019. The Making of Turkey’s 2018-2019 Economic Crisis. Institute for International Political Economy Berlin Working Paper 120: 1-19.
Bruff, Ian and Tansel, Cemal Burak. 2018. Authoritarian neoliberalism: trajectories of knowledge production and praxis. Globalizations 16 (3): 233-244.
Erol, Mehmet Erman. 2018. State and Labour under AKP Rule in Turkey: An Appraisal. Journal of Balkan and Near Eastern Studies 0 (0): 1-15. DOI: 10.1080/19448953.2018.1506296
Peck, Jamie and Theodore, Nick. 2007. Variegated capitalism. Progress in Human Geography 31(6) 731-772.
Tansel, Cemal Burak. 2018. Authoritarian Neoliberalism and Democratic Backsliding in Turkey: Beyond the Narratives of Progress. South European Society and Politics 23 (2) 197-217.
This review originally appeared in Southeast European and Black Sea Studies