Addendum to Hurriyet column: The economic consequences of Mr. Erdoğan

As I mentioned when I posted the column about an hour ago, I am quite unsatisfied on how this turned out. I noticed, after I submitted it of course, that not only I could not clarify some of my points, I also left out a couple of important points. So a quick addendum is in order...

Let me start with the clarifications:

I now notice that when I compare the AKP's policies in office with the MHP's manifesto, some might think I am comparing apples and oranges. After all, one is what is done, the other what is promised. And the AKP's manifesto had conveniently come out on Saturday, so I could easily have gone gone for a battle of the manifestos had I chosen to do so. However, this is not such a big mistake in the sense that I feel it is the opposition's duty to clearly spell out their policies.

Having said that, I should admit that I am kinda disappointed with the AKP's manifesto as well. I will not go into much detail, but while the AKP's 2 trillion-dollar economy goal (by 2023) is realistic, the 5% unemployment target is nearly impossible in the current setting. You'd need serious structural reforms, starting with the education system, to get the NAIRU down to 5%. Incidentally, PM Edogan did mention education reforms during his declaration of his party's manifesto, but he needs to clarify that.

But I must also say that the AKP's manifesto is still a couple of shirts above the MHP's, as Turks would say. To give an example, I was impressed by PM Erdogan's mention of making child care affordable, as your friendly neighborhood economist had called for in celebration of International Women's Day. Equally remarkable is his promise that pre-school education would be mandatory. Incidentally (or maybe not so incidentally), both these policies are recommendations of recent World Bank papers, so the kudos to the Bank for making itself heard and to the PM for hearing them...

I think reader Kursat says the final word on policies and manifestos with a quick comment to the column:

Apparently CHP still doesn’t consider politics as a science, yet median voter decides without reading party agendas, they don’t provide any suggestions on economy. As an economist, would you still vote for CHP knowing the fact that their macroeconomic projections are still groundless and currently worse than AKP’s?
At the end of the day, everyone cares about the money in their pocket however when it comes to the day of voting, our political values overrides capitalism.

Here's my quick answer to him, again in the blog:

Well, the answer to your question is in the last sentence of my column, but to be clear: I would not be able to call myself an economist if I voted for MHP after having read their meaningless manifesto. The CHP's is coming out on the 22nd, I think, so I will answer your question then, but honestly, I don't have much hope...

BTW, if you are a CHP fanatic, please note, before sending me a hate mail, that I did not say anything- it is my reader Kursat:) And if you are asking for his identity and whereabouts, I will have to refer you to Marky Mark's great scene (00.35-00.45) from The Departed... I guess you are not the only ones who can swear:)....

Turning to a completely different direction, I would have loved to link the strong consumption boom during the AKP years to Turkey's current account deficit problem. After all, as I explained while writing about Turkey's savings gap, such untamed growth is not without problems. For one thing, the recent decline in the savings rate is partly the result of this consumption boom I mention in the column. Similarly, economists Murat Üçer and Caroline Van Rijckeghem show that as Turkey’s low savings rate is largely explained by the post-crisis credit growth and housing price increases. But I don’t think even economists would be worried about Turkey’s savings gap while the living standards are improving.

With another sharp turn, a couple of words on the IMF comedy are in order: In retrospect, I am sure some readers will tell me that the government did the right thing by not going for the SBA; after all, Turkey did not have serious problems in financing the current account deficit. I should then remind you the story of smart-ass Japanese housewife Tasimasu, who refused to buy earthquake insurance for 20 years. She would always show off to her friends on how much money she had saved in the last two decades by foregoing that. She will be homeless in the foreseeable future!

I am kind of done with the clarifications, so now on to the missing:

I am ashamed to say that I forgot to put in arguably the AKP's biggest policy crack: Their inaction both during the crisis and the strong recovery aftermath. If you want proof, look no further than the numbers. If the government was fine-tuning the economy at all, would we have contracted so much in 2009, and then grown so much in 2010:

Yes, a picture is worth more than a thousand words, but I elaborate on this argument in the addendum to my recent column on the growth figures...

I could have also mentioned the AKP's fiscal policy, which is remarkably loose, despite what almost all economists claim, with the notable exceptions of your friendly neighborhood economist and the Global Source team. This could have gone under the spin-doctoring theme as well, as I am impressed by how the AKP is able to package this fairly loose policy s tight, not only to the layman, but also to all those economists of those fancy banks (yes, I am jealous of their six-figure salaries). Luckily for me (and Global Source), the delay of the IMF's latest Turkey Staff Report tells me we are not the only ones who are worried about the fiscal stance:) Hmmm, maybe this should be next week's column....

That's it, sorry it was a bit longer than usual, and thanks if you stuck with me this far:)...