Dependent financialisation and its crisis: the case of Turkey

Abstract

Although the financialisation research agenda has developed rapidly, especially since the Great Recession, there are still some gaps in the literature regarding Emerging Capitalist Countries’ (ECCs) financialisation experiences. We argue that the concept of dependent financialisation applies more appropriately to ECCs, in line with a recently burgeoning heterodox literature on ECC financialisation. More specifically, we suggest that a critical rethinking of the Dependency School’s arguments in the light of the current uneven and combined financialisation experiences of ECCs will generate a better structured theoretical framework. To support this, we take Turkey’s financialisation experience and its 2018–19 crisis as a case study. We suggest that dependent financialisation in Turkey can be grasped in terms of the emergence of an economic structure with two specific characteristics: (i) it has structurally higher interest rates and a high dollarisation rate due to Turkey’s mode of integration into the hierarchical global financial system; (ii) economic activity increasingly depends on capital inflows, which make the country’s economy vulnerable to the negative effects of the monetary policy decisions of major central banks. Finally, we argue that recurrent crises are the manifestations of the limits of dependent financialisation, which generates an unsustainable mode of integration to the global economy.

New Multilateral Development Banks and Green Lending: Approaching Scalar Complexities in the Global South

“…Some scholars argue that incentives and financial support for infrastructure projects indicate the emergence of state capitalism in Turkey (see Öniş, 2019). However, despite the more frequent use of public banks in the 2010s, it remains questionable whether state activism indicates the emergence of a completely new growth model or the formation of a new development strategy in this period (Akçay and Güngen, 2022). Still, the renewed export orientation may help consolidate a new state–capital hybrid that started to emerge in the late 2010s.…”

The Political Economic Sources of Policy Non-design, Policy Accumulation, and Decay in Policy Capacity

“…However, the failed coup in mid-July caused a serious decline in economic activity because of political instability. In response, the government loosened bank regulatory policy to allow households to consume more and NFCs to borrow at cheaper terms (Akçay & Güngen, 2022;Apaydin & Coban, 2022a, 2022b. More importantly, the CBRT had to hike the interest rates in early 2017 to address domestic and external pressure on TL (see Figure 1).…”

“…The capital inflow-dependent credit-led growth model in Turkey served the political-economic interests of the AKP and the NFCs until 2013, the Fed’s “taper tantrum.” With the announcement of the reversal of loose monetary policy in the United States, capital inflows toward emerging economies (EMEs) had slowed down, which included Turkey as well (Orhangazi & Yeldan, 2021). This year was also marked by the Gezi Protests and the December 17 to 25 corruption scandal, which intensified pressure on TL given tightened international financial conditions that limited capital flows (Akçay & Güngen, 2022). However, the government delayed this decision until January 2014 when the interest rate rose from 7.5% to 12% following an emergency meeting of the CBRT.…”

“…More importantly, the CBRT had to hike the interest rates in early 2017 to address domestic and external pressure on TL (see Figure 1). Yet, since the rising interest rates resulted in tightened lending standards, the government decided to subsidize credit allocation through the Credit Guarantee Fund (Akçay & Güngen, 2022, p. 307). The Fund’s collateral helped subsidize loans to be distributed at lower interest rates compared to those in the market.…”

“…Besides, this case is intriguing for two reasons. First, the country has become a basket case of a major developing country that has been undergoing a currency crisis-induced economic crisis since mid-2018 (Akçay & Güngen, 2022; Orhangazi & Yeldan, 2021; Şenses, 2022). This crisis exposed financial and macroeconomic fragilities, and the decision-makers have experimented with haphazard instruments in response to the crisis.…”