Dani Rodrik's weblog

Why Did So Many Cheer Turkey's Democracy While It Was Dying?

Claire Berlinski’s excellent account of the Western (and domestic) observers who cheered on as Turkey was sliding into authoritarianism reminds me of a point I long wanted to make.

There was in Erdogan’s early years some reason to be confused as to what was going on. Was he a Muslim democrat who was essentially the Turkish equivalent of a European Christian Democrat? Or was he an authoritarian at heart who would resort to repression as soon as he had sufficient control?

We know the answer now. But at the time there was perhaps what an economist would call an “observational equivalence” between the two scenarios.

In his early years, Erdogan was not sufficiently secure in power. Remember that as late as 2008, his party barely escaped closure thanks to a very narrow constitutional court decision. The first five years or so of his coming to power were years of transition, from the secular elites to the AKP-Gulenist alliance. During the transition, Erdogan naturally sought allies among the liberals and the West. But beyond that, the transition opened up space for political discussion and debate in ways that had long escaped the country. The old guard’s power was weakening while Erdogan had not yet consolidated his power. The former could not put the lid on the new developments, while the latter was not strong enough (yet) to crush all potential opposition.

So at the time it may have been genuinely hard to tell where Turkey was really headed – greater democracy or simply a new set of authoritarian elites.

What also contributed to this was that Erdogan, whose reference point was Islam and Ottoman flowering rather than Turkish nationalism and the Young Turks, did not share the secularists’ taboos on two long-festering issues – the Armenian genocide and the Kurds’ demands for greater autonomy. This allowed much greater freedom to discuss those issues than had been the case under the secularists, adding to the appearance of democratic flowering.

To distinguish between the two scenarios, you’d have to look very carefully beneath the surface. Until 2010, I was among those who gave Erdogan the benefit of the doubt. But then I was not writing on Turkey’s politics and did not feign any expertise in it. When I started to pay more attention as a consequence of the Sledgehammer case in early 2010, the true nature of the Erdogan and his Gulenist allies became alarmingly clear. This was not just a massive power play aimed at current and potential opponents. It represented the wholesale undermining of the rule of law. Erdogan was at worst behind it, at best knowingly complicit in it.

In any case, by 2011 there was absolutely no excuse for the commentators Berlinski mentions (and many others) to be singing the democratic tune. I have yet to see a single one of them provide an apology or an honest account of how/why they got it wrong.

Prudential regulation, capital controls, and second-best

A usual argument against the use of capital controls as a prudential measure is that it is always better to tackle problems at their source rather than trying to deal with symptoms.  This is called the principle of economic targeting in Economics, one of the discipline’s most powerful teachings. The problem with indirect remedies is that they create problems themselves, “by-product distortions” in Econ-speak. With capital controls, those would be corruption and the discouragement of trade and other flows that are not necessarily a problem.

Hyun Song Shin essentially relies on this principle when he argues against capital controls (in a speech yesterday in Washington, DC):

The lesson is to distinguish underlying causes from outward symptoms. Yes, the 2008 financial crisis was in large part a cross-border phenomenon, but focusing on capital flows confuses the symptoms (capital flows) from the underlying causes (excess leverage and funding risk). If the problem is excessive bank leverage and funding risk, then address these risks directly with traditional microprudential, or regulatory tools.

This argument always reminds me of opponents’ argument about why gun controls are not needed: “it’s not guns that kill people; it’s people.” The implication is that we should target the criminals and not the guns. Of course, if we could perfectly regulate the behavior of future criminals, we would not need controls on the sale of guns directly. But most of us are reasonable enough to realize that we have imperfect control over the behavior of gun owners and so we think direct gun controls make sense.

Similarly, if one could design the perfect prudential regulatory regime, targeting all the relevant distortions at source and adjusting pre-emptively to all future financial innovations, then indeed we would not need direct controls on capital flows. But if we cannot, and we surely cannot, we need to work on as many margins available to us as we can. That is why capital controls belong in the arsenal of sensible policy makers.

One of my favorite aphorisms is “the world is second best, at best” (due to Avinash Dixit). It tells us that first-best logic can be misleading in the real world. Interestingly, Shin himself starts his speech by reminding us of the second-best theorem. But then he goes on to apply a first-best argument to dismiss capital controls.

Trade, redistribution, and social dumping

I just saw this response from Joel Trachtman to my column "Too Late To Compensate Free Trade's Losers." Trachtman argues that "the fundamental problem of winners and losers will not be solved by these changes."

I do not disagree. But the fundamental political problem with trade is not there are winners and losers -- the domestic market generates much greater job churn and dislocation than trade does. It is that it generates unfair redistribution, or at least redistribution that can be legitimately perceived as unfair, when goods cross jurisdictional boundaries.

As I explain here:

It’s important to distinguish between two versions of an argument as to why trade may be problematic from a social or political perspective.

Some suggest trade is problematic because it redistributes income. The basis for that claim is true, but trivial. Pretty much everything else that happens in a market economy somehow redistributes income. Technology and market competition are the sources of endless churns in an economy. Moreover, plenty of other things, including skill-biased innovation and minimum-wage laws, have vastly greater effects on income distribution than trade.

So it makes very little sense to set international trade apart and decouple it from other domains or approaches for dealing with inequality in labor markets at large (progressive tax systems, active labor market policies, employment-friendly macro policies, etc.). Imports from Germany may adversely affect domestic companies that are displaced, but there’s no reason to treat the people who lose out any differently from workers who are adversely affected by, say, technological innovation. There is a coherent justification for compensating the losers of free trade for reasons of solidarity and equity, but the justification would apply in the case of innovation. Consequently, the preferred remedies should be the same as well.

That brings us to a different social and political objection to trade — that trade violates norms embodied in our institutional arrangements. The suggestion here is that trade may undercut the social bargains struck within a nation and embedded in its laws and regulations. [In this case] compensating the losers would be beside the point, because what is at stake is the surreptitious modification of the rules of the game — the undermining of domestic social bargains through the back door. Trade is not merely a market relationship, but an intervention into domestic institutions and an instrument for reconfiguring them to the detriment of certain groups. It would be entirely legitimate to respond to such an injury by directly curtailing the trade flows that have the alleged effect. After all, this is no different from keeping out imports that violate, say, domestic health and safety regulations, which most countries already do.

As Pierre Rosanvallon puts it, inequality is felt most acutely when citizens believe that the rules apply differently to different people.” It is not inequality per se that people mind; it is unfairness.

This also relates to a question I get very often. If trade is apparently a small component of the overall impact on labor markets, why focus at all on globalization or devise special remedies for globalization. The answer is that it is not the overall quantitative impact that often matters; it is the normative filter through which those impacts are viewed.

Dismal thoughts about the Turkish referendum

I don’t write a lot on Turkey these days. (My latest piece was published last September. It was on Erdogan’s missed opportunities to enter history books as a truly great leader, rather than the corrupt tyrant he seems destined for.) It’s partly because the subject is too depressing: try hard as I might, I really cannot find a good scenario developing over the years ahead.

It’s also because conventional wisdom has so thoroughly converged on what I have been saying since I first began to write on Turkey’s politics in 2010. For a few years, I was a relatively lonely voice in a Western media landscape full of cheerleading for Erdogan and his then-allies, the Gulenists.  (Sorry pundits, I wrote my “Turkey’s Democracy is Dead” piece seven years ago, back in June 2010!) I don't see much to be gained today by repeating what everyone else is saying about the abysmal state of Turkey’s democracy and rule of law.

I do think a lot about Turkey, mostly about whether there was another path. Had the secular elite been more tolerant and opened up the political system earlier, might the religious-conservative backlash been avoided? Or, as many among those former elite argue these days, not without some justification, would the end simply have come sooner?  

Had the Gulenists not whipped up Erdogan into a frenzy of paranoia by concocting fictitious coup attempts, might he have eased up? What if the Gulenists had not been so intent on toppling him, once their alliance collapsed? What if the coup attempt, organized by Gulenists in all likelihood, had never taken place? What if Erdogan had not allowed the Gulenists so much power in the bureaucracy, judiciary, and police in the first place?

What if France and Germany had provided a clear path to European membership soon after 2005? What if Kurdish fighters had nor restarted their military campaign against the Turkish state in the summer of 2015? What if there were real leaders within the AKP, not wannabes such as Gul, Davutoglu, or Arinc? What if the main opposition party was run by a charismatic leader who could connect with the masses?

What if, what if.

Erdogan is not a political Islamist or an Islamic ideologue. His own sensibilities and personal cultural orientation are Muslim for sure. But he is first and foremost a political opportunist. That is a good thing, because it means he knows when and how to lower political tension when needed and establish stability.

Had he won the referendum with a comfortable margin, we might have consoled ourselves by thinking that the country would be moving into a calmer period. Erdogan might then have chosen to contest the next election for executive president – which will happen in 2019 latest -- as a unifier. But he lost all the major cities and may have needed some last minute skullduggery for the constitutional change to pass. So I do not see Erdogan easing up on his divisive rhetoric and policies anytime soon.

Asked to predict Turkey’s future by a Turkish newspaper a while back, I said the country would end up looking like Malaysia at best and Afghanistan at worst. A liberal, secular path, with tolerance for diversity, civil liberties, and free speech no longer seems in the cards. That is still pretty much my prognosis.

PS. And here are my rules on post-election punditry, posted on Twitter yesterday: