The outcome of tonight’s apparent coup attempt in Turkey remains unclear, but the motivation for regime change in Turkey has been building under the surface for years. Turkey faces a perfect storm of economic, political and foreign policy problems.
First, Turkey’s much-heralded economic growth spurt of the 2000’s has come to a grinding stop. The Erdogan boom, which inspired predictions that Turkey might emerge as another China, resembled the Asian experience less than it did the Latin American credidt bubbles of the 1980s or the American subprime bubble of the 2000s. I wrote last April 25:
Turkey’s economy appears to defy gravity: with annualized GDP growth of 5.7%, it is the emerging market that has held up best under stressed global economic conditions. That is entirely due to the growth of domestic consumption; Turkish exports are flat despite the sharp devaluation of the country’s currency. And domestic consumption depends on a flood of high-interest consumer loans.
According to the Turkish central bank, consumer debt is now almost equal to total personal income in Turkey, vs. a bit over 20% in the United States. The average interest rate on consumer debt, the central bank reports, is just under 17%.