Turks Take on the IMF

Turkey has what is usually called a “fledgling democracy.” This has nothing to do with how open or democratic the Turkish government is–in fact, most observers agree that the bloated Turkish military (the second largest military force in Europe) still runs the country. What the term “fledgling democracy” really means, in this case, is that the current Turkish government is in a lot of trouble because of bad advice from the IMF.

The problem started last year, when the Turkish banking industry began to collapse. The IMF had been pushing Turkey to privatize most of its state industries, and Turkish banks were on the front line to help out. However, lack of financial regulation (an IMF requirement) allowed Turkey’s private banks to make enormous, risky, largely unsecured loans to help finance some of these deals and several other idiotic financial schemes. In November, the house of cards tumbled when the government closed down 10 private banks, which left billions in unsecured debt in the hands of the government.

The IMF, however, assured Turkey that it would get a loan to cover its expenses.

In February, the banking scandal expanded to include three of Turkey’s largest banks. The outstanding debt balance grew to an astronomical $20 billion. Foreign investors fled Turkey’s stock market like rats deserting a sinking ship. The local currency, the lira, plunged to half its former value, which caused the prices of fuel, food, and consumer goods to double and, in some cases, triple. Naturally, wages remained depressed, which is a big draw for transnational corporations, but has plunged Turkey’s middle class into poverty overnight. Predictably, the IMF responded by urging Turkey to speed up its privatization scheme, not slow it down.

And so began the street protests.

Turkey’s “fledgling democracy” has created a large underclass of people who live in shanty towns surrounding its major cities. These folks are peasants and members of ethnic minorities (including Kurds) uprooted because of civil strife, military repression, lack of infrastructure, and economic problems in the countryside. In addition, the new currency devaluation has hit small, urban, family businesses (which still make up the majority of Turkey’s economy) particularly hard. In the past year, nearly 14,000 family-owned small businesses have gone under. And these people know who’s benefiting from the crisis: bankers (who are getting a full government bailout) and big businesses. And they know who’s responsible.

“The IMF wants everything done too quickly,” said Erhan Erkan, a 32-year-old taxi driver. “We are already poor people who are working hard and trying to make a living. I was very depressed watching the dollar go up and the lira go down. If you have savings, you lose money without even spending it. And now there will be price increases and new taxes.”

In late March, the street protests began in earnest. By the first week of April, they were a daily occurrence in Ankara, the capital city. They gained momentum after a small businessman–the owner of a florist shop–met Prime Minister Bulent Ecevit in the street and threw an empty cash register at him. On April 11th, 70,000 people–mostly shop owners and small tradesmen–were in the streets of Ankara, attempting to push through police lines and get into the parliament building to force Ecevit and his coalition government to resign. Perhaps they were inspired by the success of the Serbian demonstrations that unseated Milosevic.

The Turkish middle class doesn’t, however, have the military’s support (as the Serbian demonstrators did). Turkish police turned water cannons, tear gas, and finally riot clubs on the demonstrators, injuring over 200 people.

Ankara’s mayor placed a month-long ban on demonstrations. Yet union leaders organized demonstrations that drew over 40,000 people into the streets of Istanbul, the country’s financial center, three days later. The protests continue, as the Turkish government scurries to find an answer to its economic problems. The most obvious answer has already been suggested by Turkish newspapers: dump the IMF austerity program. Will they? We’ll see.