Magazine article The Spectator

The Sick Man of Europe

Magazine article The Spectator

The Sick Man of Europe

Article excerpt

Ankara

FOR the past year and more, the IMF has regularly been in Ankara. Students of the subject will know that when the IMF appears, it is time to count the spoons: is there anywhere that has survived its ministrations? I should have known what to do, and changed my money into dollars before it was too late. I did in fact at least have some, immediately convertible, and so did not lose too substantially. But masses of small traders and ordinary people have, in the course of the last two months, seen their money cut in value by half. The Turkish lira had stood at one million to the pound. It is now not far from two million.

This has all happened almost entirely out of the blue, in a country that had been doing rather well. Turkey has its problems, of course, but the 'real' economy is a success story - certainly if you compare it with conditions 20 years ago. Back then, Turkey exported little, mainly primary goods (nuts, in fact). Now it makes fax machines, cars, prize-winning aircraft, good furniture, tractors and pharmaceuticals. Large parts of the south and west, and of Ankara itself, have been prospering. Its foreign trade may, within a few years, be larger than Russia's, although Turkey has little in the way of raw materials. With one or two exceptions, Englishlanguage books do not make this point adequately; they are too busy being whimsical or moralising. The point appears, nevertheless, in a Russian book that has come my way, Turtsiya mezhdu Evropoy i Aziey (Moscow, Academy of Sciences, 2001). If you come from Russia, Turkey appears to be a booming place, where people work well and live decently, and where the adult men live out their three score years and ten, unlike poor old Russians. My Russian experts recognise as much, and know what a long road Turkey has travelled since 1979, when the makers of the Five Year Plan assembled their statistics by candlelight. To recognise this is an essential start for any discussion of what, now, has gone wrong. The Russians note: public finance.

The country had gone through the 1990s with a weird system. There was, on the face of things, 80 per cent price inflation every year. More than half the money stock was held in dollars, however. To keep inflation from hitting the stratosphere, interest rates were very high, and a crawling dollar peg was announced; you could convert at will. The dollar, generally, rose in value, but not quite at the same rate as the printing press produced paper money to pay the government's bills. If you moved in and out of Turkish money and dollars, you could, with proper timing, make a substantial gain, and that was how the Turkish educated classes survived. The system was hard on ordinary people, but there were consolations. A man could retire after 25 years' work, collect a pension and take a second job (there are countless small services on offer, and innumerable small shops, open until midnight). The pension would be vaguely linked to the dollar index, and every six months state salaries would be raised according to that as well. The state, meanwhile, occupied a substantial part of the economy, whether directly through the usual steel factories or indirectly through subsidies, e.g. to farmers, which take twice as large a fraction of the GDP as in Western Europe. The system, in its odd way, worked: in Turkey, you see far fewer beggars than in Western Europe; I have seen fewer in six years here than on a single afternoon in the middle of Oxford. …

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