Market Maniac

Lessons from Erdogan
May 24, 2016

We spent a few days a couple of weeks ago in Istanbul, which is without doubt one of the great cities of the world – indeed, it may well be the greatest since it so well merges the East with the West, the traditional with the modern, the classic with the contemporary. The Bosphorus, to me, is the most evocative of water bodies, comparable, if at all, only to Venice. Before I get too rapturous, let me return to Turkey, where, after Istanbul, we went on to visit with family in Izmir, which was, of course, also wonderful, followed by a tour of Ephesus, one of the cradles of civilization. And finally, to a friend’s wedding in Antalya where, ever the gentleman, I danced with the bridegroom’s mother till she got so excited that she fainted and had to be taken to hospital; fortunately, she recovered and I am still – I think – a welcome guest.

As I brush these memories smiling from my mind (and the taste of olive oil from my lips), I realize that, at least for a visitor, Turkey is in a wonderfully sweet spot. It is very well developed, with a GDP per capita of around $ 15,000; the infrastructure is extremely smooth, with many, many great restaurants, amazing food, excellent wines and, of course, rake. At the same time, the people have a personal friendliness and focus on family that is decidedly Asian multiplied many times by an encompassing Muslim hospitality. It’s hard not to have a great time there – the other day in my office building I ran into a young guy (early 30’s) who said he’d been to Turkey five times in the past two and a half years!

Of course, on the other side, Turkey remains, like almost all countries in the world today, a highly polarized society. Most of the people I know there – and we have a large, and growing, number of Turkish friends – are vehemently, and sometimes virulently, opposed to Erdogan, the strong man who has presided over many years of good economic growth but, in recent times, turned to an increasingly aggressive control of society, trying to shape it (in the views of the liberal elite) into a backward Middle Eastern country. He is also accused of being hugely personally corrupt and foolishly ambitious, which has exacerbated both domestic and international political problems and made security a major issue, although, to be honest, we never felt a whisper of it during our trip.

And while there are certainly a large number of women in headscarves – a badge, if you will, of local conservatism – there are an equal number in miniskirts and Western attire, and even if the ratio is slowly moving in the direction of conservatism, it would be – at least, to this visitor – highly exaggerated to say that Turkey is moving back from Ataturk to becoming an Islamic country a la Egypt or Pakistan.

Try and live here, some of my friends would doubtless say to that.

Which provides a neat segue to India, where, again, there are a huge number of liberal-minded people who fear the dream of a RSS-led India – indeed, Amit Shah was on record recently saying that he was surprised that people didn’t know that there was little difference between the BJP and the RSS, reinforcing the polarization which is beginning to seem almost like a policy approach.

And even though the fear of speaking out, which was palpable when Modi took the reins of power, is considerably lower, and the incendiary and buffoonish comments from sections of the ruling establishment have largely disappeared, there remain concerns whether there are any real liberal economic thinkers in the administration, which is a pre-requisite for sustained economic growth, or whether there is any room for real liberal social thinking in India today.

A friend of mine pointed out that, while the Turkish economy has grown from $ 7,000 to $ 15,000 over the past decade under liberal economic policies of Erdogan, the growth rate is shriveling partly because of the global environment but also – and, in his view, largely – because of the current conservative and constraining social environment. He said he thought that, unlike Erdogan who “faked” it for several years, Modi has let his right-wing conservatism slip out of the bag too early, which will prevent India from reaching even close to its potential growth.

Again, corruption, another drag on growth in Turkey – Erdogan is suspected of being hugely personally corrupt – remains a serious scourge in India. While Modi is clearly not personally corrupt and while his government’s successes in curtailing project-wise corruption is undeniable, there’s also no hiding from the huge amounts of black money in election spending, which, on a rupee-per-rupee basis, has the same deleterious impact on the economy and society. ADR has released a report that showed that in the 2014 Lok Sabha election, all the political parties together spent officially a total of Rs. 1,588 cr. This is laughable since it is common knowledge that the last Lok Sabha election cost many multiples of that. Indeed, there were (admittedly anecdotal) reports that it cost more than the previous US Presidential election, which came in at around $ 5 bn (Rs. 30,000 cr). While all parties (with the exception of AAP) are implicated, the “corruption-free” BJP was the biggest spender at that time.

Given India’s low base, we should be able to double our GDP per capita (current $ 1,600) in 5 or 6 years as opposed to the 10 years taken by Turkey under Erdogan. However, in the face of global headwinds – the reverse of ten years ago – we will all need to keep pushing the government towards more liberal economic and, importantly, social policies to get there, all the while building sustained pressure on making political party finances more transparent.

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