Turkey the next bubble?

August 9, 2011

The usually prescient Spengler has been ringing this bell for months.  His latest:

Erdogan’s bubble recalls Argentina in 2000 or Mexico in 1994, where a brief boom financed by short-term foreign capital flows led to currency devaluation and a deep economic slump. In the advent of the June 12 national elections, which returned Erdogan as prime minister, the Turkish government bought votes through cheap credit.

. . . Financing higher consumption with short-term debt helps explain why Erdogan’s Justice and Development Party (AKP) crushed its secular opposition in the elections. Erdogan campaigned on his success as an economic manager rather than his Islamist ambitions, with good reason, for most Turks cares more about material welfare than the AKP’s religious agenda.

An economic slump would undercut Erdogan’s ability to govern. His confrontation with his country’s military leaders, who last week resigned en masse to protest the persecution of senior officers on fanciful allegations of political crimes, points to the deep fissure in Turkish politics.

. . . Now that the Cairo mob has turned against the “Internet-savvy” protesters on Tahrir Square, Libya and Yemen remain immersed in civil war, and Syria’s Bashar al-Assad regime butchers civilians, there is not a single stable polity in the Arab world outside of Saudi Arabia, whose circumstances are unique. What I called “the Internet bubble in Middle East politics” in a February 16 essay (See here) has popped, to the embarrassment of the Western reporters who drooled over the Internet cafe-flies who prompted Egypt’s popular rebellion.  If it turns out – as I predict – that the “Turkish model” differed little from the old Latin American borrow-and-bully model, we should conclude that no successful political model presently exists in the Muslim world.

Read the whole thing.  The question that follows is:  In which direction does Turkey turn for help?  The West is teetering financially and may not be able to help.  Does a failure of “the Turkish model” push Turkey further into the Russian/Chinese orbit?


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