Capital is Bleeding the Turkish Proletariat Dry

Turkey’s economic outlook looks bleak with no way out for the proletariat. In May, inflation touched 75 percent, and as of August, it is holding at 62 percent. This trend, which exploded at the beginning of 2022, peaked at 85.4 percent in October of that year, then dropped to 38 percent in June 2023. However, a new increase has brought inflation back to current levels, suggesting that there are no immediate solutions on the horizon.

In the context of an already acute crisis, in February, Turkey was hit by a devastating earthquake that claimed more than 50,000 lives and forced three million people from their homes. The consequences of this natural disaster, combined with galloping inflation, caused prices of essential goods to quintuple within just 18 months, exacerbating the situation for the proletarian population.

The government in Ankara, through the policies of Recep Tayyip Erdoğan, has refused to raise interest rates, which is one of the most common tools used by central banks to fight inflation. Calling the hike “the mother and father of all evils,” Erdoğan kept interest rates artificially low, causing the Turkish lira to collapse. Today, the national currency exchange rate has plummeted to 34 liras to one USD, compared to 5.5 liras just five years ago. This devaluation has made companies’ foreign loan costs unsustainable, increasing difficulties for domestic industry.

Behind this economic choice is a failed attempt to solve Turkey’s chronic trade deficit by relying on an undervalued currency to boost exports. However, exports have not increased, while imports have continued to grow, further exacerbating the problem. Domestic economic actors, in an attempt to protect themselves, began accumulating non-financial assets, contributing to the inflationary pressure.

In 2021, the government introduced special savings accounts to compensate savers for losses from the weakening lira. Today, such accounts amount to the equivalent of $102 billion, representing a ticking time bomb for the state budget. To further complicate the situation, the Central Bank began printing money to finance government spending, triggering a spiral that further pushed the lira toward the abyss.

Gold has become the main refuge for speculation, coming to account for one-third of Turkish imports. The government itself, through propaganda, encourages citizens to buy gold instead of converting lira to dollars or euros. This phenomenon has become intertwined with foreign policy. Much of the gold is purchased from Russia, bypassing international sanctions imposed as a result of the war in Ukraine.

The Turkish crisis worsened to the point that the United Arab Emirates intervened, signing an agreement in 2022 to strengthen Turkey’s foreign exchange reserves. However, international investors are fleeing: foreign participation in the Turkish government bond market has plummeted from 25 percent in 2013 to less than 1 percent in 2023, while more than $7 billion has been withdrawn from the stock market.

Turkish banks and businesses are now in deep distress. Non-financial companies’ foreign currency liabilities exceed their foreign currency assets by more than $200 billion, signaling a far from rosy future.

On the social level, inequality is growing exponentially. About 21.3 percent of the population lives below the poverty line, with wealth distribution equaling countries such as Brazil and South Africa: the richest 10 percent hold 32.5 percent of national income. Moreover, Turkey boasts the highest youth unemployment rate among OECD countries, a sign of an explosive situation that can only lead to further social tensions.

The minimum wage, set at 8,506 liras per month for 2023, is well below survivability: as of January 2023, the “hunger threshold” was estimated at 8,782 liras, while the poverty line reached 30,379 liras. In this scenario, the Turkish proletarians have no choice other than class struggle. This is their sole means to resist the oppression of the national bourgeoisie and its old habit of “crying to the bank,” which is typical of every bourgeois regime.