From the September-October 2018 issue of News & Letters
Michael Roberts, a Marxist economist, wrote in May 2018: “Rising global interest rates and the growing trade war initiated by U.S. President Trump are going to hit the so-called emerging capitalist economies like Turkey. The cost of borrowing in foreign currency will rise sharply and foreign investment is likely to reverse….Turkey is now near the top of the pile for a debt crisis, along with Argentina (see “Argentina in crisis”) , Ukraine and South Africa.”
Turkey’s fast deteriorating economic situation has been in the headlines, with nervous investors pulling out, as the Trump administration has increased tariffs against steel imports to 50%. However, its developing crisis started long before.
The value of the Turkish lira has been in decline for years, recently falling precipitously. In part this is due to the erratic economic policies of President Recep Tayyip Erdoğan. Inflation surged like a rocket when he did not raise interest rates. Credit and foreign borrowing, not increased Turkish exports, financed what appeared to be rapid economic growth in the last two years.
The increase in the value of the dollar combined with rising interest rates globally means that Turkey had to face the reality of global capitalism. Its debt has to be paid principally in dollars at higher interest rates as the lira’s value collapses. An International Monetary Fund loan comes with stringent austerity requirements, which, no doubt, will be imposed on Turkey’s masses.
Turkey is an example of the difficulties that emerging economies are currently facing—countries such as Argentina, South Africa, Indonesia and India, among others. India’s growth rate is now the highest in the world, but who benefits? Certainly not the Indian masses, with high inflation leading to protests over fuel prices in New Delhi.
Under the whip of global capitalism, these so-called emerging economies have little real independence, and their masses live under a no-exit sign.