Until the past week, the costs of Turkish President Recep Tayyip Erdogan’s brand of populist authoritarianism were mostly measured in eroded civil liberties and political norms.
Now, its economic costs have very rapidly become impossible to ignore.
Turkey’s fragile currency, the lira, has gone into full meltdown since word last Friday that the United States was stepping up punitive aluminium and steel tariffs – a decision rooted in a spat over the fate of a jailed American pastor Mr. Erdogan blames for plotting a failed coup in 2016.
The jolt has been felt in asset markets around the world, and despite a significant cash infusion from Qatar, the instability shows few signs of abating.
But this is more than just reaction to bad trade-policy news; Turkey’s fiscal crisis has been building for months, if not years, as investors have with good reason grown skittish about how Mr. Erdogan has wielded his iron grip on power to pursue a reckless growth-at-all-costs agenda.
That strategy has mainly involved staggering levels of both public expenditure and foreign borrowing. The latter has become crushingly expensive to reimburse since the lira began to dive late last year. And absent institutional and legal checks on his authority, Mr. Erdogan has exerted his influence on the country’s central bank to hamper its ability to fight inflation. (He holds a curious opinion on interest rates, which he called “the mother and father of all evil” in May.)
What emerges is a cautionary tale that could scarcely be more timely.
Key ingredients in Mr. Erdogan’s rallying of much of Turkey’s population behind him over his decade-and-a-half in power – his endless funnelling of money toward investments that buy him support and his anti-elite dismissal of normal economic wisdom among them – are straight from a playbook increasingly familiar as populists rise around the globe. It’s an approach that can help persuade the public to overlook other excesses of power. But it is destined to cause severe consequences in and of itself.