by George Friedman
August 20, 2018

Too easily we lose sight of historical context, and when it comes to nations, context is a matter of decades or centuries, not hours or weeks. Those trying to understand Turkey’s financial crisis are checking the price of the lira each morning. Others are following the predictable script of financial crises by assigning the roles of victims and villains. In reality, the causes of Turkey’s crisis are complicated, and many have nothing to do with economics. Trouble has been percolating beneath the surface for years and has created the need for a major recalibration of all political and social systems. That is what is happening in Turkey right now: a recalibration. Financial crises, especially in emerging powers, are common. They destabilize and weaken, but as with the U.S. in 1929, they seldom destroy. Turkey is no different.

 

Historical Context

The Ottoman Empire had been a great empire, spreading its power deep into Europe, the Mediterranean, the Middle East and North Africa. It was majority Muslim and was governed by Muslims, but it was prepared to ally with Christian states and to trade with anyone. It had integrated Islam with a sophisticated foreign and economic policy. The collapse of the Ottomans after World War I left Turkey diminished in size, power and wealth. The Islamic rulers were discredited, and Turkey was recast by Mustafa Kemal Ataturk as a European, secular power. A former army officer, Ataturk tasked the military with defending his idea for the new Turkish state.

Turkey refrained from participating in World War II, but in the aftermath, in response to Soviet attempts to destabilize it, Turkey became a key part of the U.S.-led anti-Soviet coalition. Membership in this alliance was necessary and reinforced the self-image of Turkey as Western and secular. Any Turkish government that strayed too far from Ataturk’s vision triggered a military intervention. Turkey was never quite stable, but its place in the world was fixed.

Turkey was suddenly torn from its moorings in 1991-92 by three events. First, the collapse of the Soviet Union took away the anchor of its national strategy. Second, the signing of the Maastricht treaty and the long-term refusal of Europe to allow Turkey into the European Union, in spite of Turkey’s desire to join it, created a gulf between Turkey and Europe. Finally, Operation Desert Storm, along with other events, ignited Islamic self-awareness and destabilized the Turkish model, in which a secular, Europeanist elite oversaw a passive Muslim populace.

Turkey became increasingly hostile toward Europe, and vice versa. The surface issue was membership in the EU, but the Turks were doing well outside the bloc – perhaps better than they would have done in it. The deeper issue was Europe’s mistrust of Turkey’s Islamization and of Turks in Europe, as well as fears about immigration and terrorism. Turkey saw Europe, and especially Germany, as trying to undermine it.

The Turks also became suspicious of American intentions, unwilling to play the role of very junior partner to the United States. In particular, they refused to participate in the 2003 invasion of Iraq, fearing that it would destabilize the region, which it did. Other Turkish relationships, such as the one with Israel, atrophied or ruptured.

And as Islamic ideology grew stronger among the Turkish people, the regime needed to integrate it. Along came the Justice and Development Party, or AKP, in 2001. By the 2002 elections, the AKP was the largest party in Turkey’s parliament. In some ways the AKP was less radical than it appeared; though the secularists were uneasy, the regime was not suddenly overthrown. But in harnessing the Islamic sentiment that was sweeping the Muslim world, it moved Turkey away from what it had been since World War I.

 

Booms and Busts

And the AKP was remarkably successful in other ways. It oversaw an impressive period of economic growth. With the exception of 2009, after the global financial crisis, Turkey maintained an annual growth rate between 5 and 10 percent. Its growth was one of the elements that turned it from a marginal power into a significant regional power. It gave it a seat at the table with the U.S. and Russia when it came to the region’s affairs. Foreign lenders and investors poured into Turkey to take advantage of the boom that would never end.

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Everything was going well on the surface, but beneath the surface, it was approaching unsustainability. First, an extended boom like what Turkey experienced, without major recessions beyond 2008, allows inefficiencies to build up. Recessions are necessary correctives for rapidly growing economies, and the constant flow of foreign money into Turkey hid the underlying problems.

Second, the question of secularism and religion was not settled. The army, or at least part of it, continued to see itself – as the constitution called for – as the guarantor of secularism. As the government apparently became increasingly Islamist, powerful elements within the military saw it as their duty to halt this movement in a way that had become normal since World War I: by intruding into the political process.

Third, there were strategic issues facing Turkey in Syria, Iraq and the Black Sea, not to mention the Kurdish issue in Turkey itself. Turkey knew what it no longer was, but it was not sure what it had become. It didn’t have clear strategies in any of these places and found major powers intruding near its borders. Turkey’s behavior was tactical, and the absence of a strategy made it unpredictable to other nations, which strained relationships.

The crisis broke in 2016 when the Turkish military tried to overthrow the AKP and replace it with a military government. The failed coup prompted the government to both eliminate any future threat from the military and intimidate potential enemies. It saw this as a necessity to protect the democratically elected government and as an opportunity to impose its will on society as a whole.

The coup and the extended state of emergency changed the perception of Turkey among foreign investors and lenders. Although economic growth continued, Turkey’s stability came into question. Where the government hoped the vigorous pacification program would increase confidence in Turkey, it had the opposite effect. The government cracked down hard and long. The length of the crackdown magnified the threat to the government and the government’s threat to stability.

The influx of foreign money slowed, and the underlying weaknesses of the economy began to show themselves. The government needed high growth to maintain stability. As confidence declined, it attempted more and more desperate measures to contain the problems, increasing unease among outsiders about the economy’s stability.

What has happened is that in the political, strategic and economic spheres, the solution that Turkey found a decade after the 1991-92 breakpoint reached its limits. The current crisis is part of a systemic problem. The United States, having grown dramatically from the Civil War until the 1920s, underwent a massive financial crisis that aligned with a restructuring of the federal government and World War II. There were those who doubted that it could recover, but the U.S., of course, weathered these crises.

I have argued that Turkey is emerging as a great regional power. This crisis does not diminish my confidence – such crises are common, even necessary, among emerging powers because they clear away failing parts. And it is essential not to spend time imagining that political leaders and their idiosyncrasies determine the long-term direction of nations. Over the long term, geopolitical realities, like economic realities, are not subject to the whims of anyone. Turkey, like other countries, cannot be understood by looking at one person or a few people. And Turkey remains, by geography and history, the key power in the region.

 

— Turkey in the Long Run originally appeared at Geopolitical Futures.