Mindless Growth

If the economic growth policies of the Justice and Development Party (AKP) period were to be described with one adjective, the word “mindless” seems the most appropriate. Mindless because of the corner cutting and mindless because they are not sustainable from an economic, ecological, or societal point of view.

Let’s start at the end and examine the Vision 2023 ‘strategic’ targets announced by the AKP, identifying which sectors are considered to be part of reaching the 2023 targets of 10th largest economy in the world (currently 17th), 500 billion dollar export trade (currently 163) and per capita income of 25 thousand dollars (currently 11 thousand).

Expanding the economy is not as difficult as is generally thought – particularly in a country where, in the name of growth, institutional structure and regulations can be as pliable as needs be. This is the first point that needs to be understood by those heaping praises on the AKP for their rapid expansion of the economy while the world is in crisis. It is true that in many European countries the economy is not growing but then it hasn’t occurred to anyone there to fell the last remaining forests to make way for roads, or to introduce a sub-contracting system to reduce the costs of employers – moreover it won’t occur. There is no skill involved in expansion within a structure that sends people in the mines and shipyards to their deaths and devastates nature – because it simply is not sustainable.

The vision of what exactly?

In research I carried out using data compiled from the 2003-2011 input-output tables, I identified the 12 sectors that made the largest contribution to Turkey’s growth in this period.

Leaving aside sectors like agriculture and textiles that traditionally add to growth, the sectors that shouldered the growth in this period were those related to Construction and construction related fossil fuel energy: Iron-Steel, Electricity-Gas-Water, Real Estate services, Road Transport etc.

A construction sector revived by tube thoroughfares, dual carriageways, apartment complex-shopping malls, bridges, canals and urban renewal needs to be fed by an increase in iron-steel, cement, mining and energy production. Once the shopping malls and apartment complexes are in place, the activity of selling and renting them out invigorates Real Estate services. With dual carriageways and bridges, road transport becomes more profitable leading to a revival in this area too. The problem is that most of the sectors dependent on construction, rely on outside sources for intermediate goods and capital outlay.

If we take the analysis a bit further, we see that these are the sectors that contribute most to the current account deficit (put more plainly, the difference between import and export), one of Turkey’s persistent problems. As of 2013, intermediate goods and capital outlay make up 88% of all imports. Assigning economic expansion to these sectors within such a broken structure, is rapidly increasing the chronic current account deficit that last led the country into crisis in 1994 and 2001. It should be noted that no country can realistically continue for a long time with a current account deficit, as well as the fact that the ratio of account deficit to GDP rose to 7.9% from the end of 2013, making the situation we have arrived at today more acute than that of 1993 and 2000. A chronic account deficit can only be rectified with rational policies, if this cannot be done, financial crises will do it for you with large economic and societal costs just as in 1994 and 2001. With the deficit at its current level, the question is not whether or not there will be another financial crisis but when.

If we look at recent government policies, we see that rather than changing the structure that is creating the crisis, there have only been short term interventions to save the day. Forget the concept of raising labour and environmental standards to slow down the ‘mindless growth’ because instead, they have been made as flexible as possible and rulings made at public hearings have been ignored contributing to the rot along with so many other decisions; some of the deregulation implemented by the AKP government is listed below:

• January 2003 to today: the Public Procurement Law has been changed over 160 times last time in December 2013.
• May 2013: Nature and Biodiversity Protection Law is enacted despite fierce opposition from green movements
• May 2013: Environmental Impact Assessment (EIA) Exemption Act that exempts “crazy” projects from EIA process
• February 2014: Change in the Protection of Cultural and Natural Assets Law, allows construction on heritage sites known as SIT
• April 2014: Conservation of Wetlands Regulations changed three times to allow 3^rd Airport construction to continue
• April 2014: Guaranteed Treasury finance for Public private partnership projects to ease financing conditions of domestic banks behind “crazy” projects.

Along with the relaxing and bending of existing regulations, there are still numerous international treaties that Turkey continues to avoid signing. The Aarhus Convention and ILO Agreement NO. 176 on safety in the mines are just two of these directly connected to our subject.

If only that was the one problem. The assignment of growth to these 12 sectors is destroying the ecology of Turkey to an irreversible degree. Another tragic reality that came out of analysis carried out using data from the Global Footprint Network, was that these 12 sectors are responsible for 80% of Turkey’s ecological footprint; just 20% is down to the other 23 sectors.

Turkey’s ecological footprint is already twice as much as its bio capacity. In other words, to absorb CO2 emissions from electricity generation, road haulage etc. there needs to be twice the amount of forestry Turkey currently possesses; in order to keep up with food production the amount of agricultural land needs to be 25% greater than the amount it has. What does all this mean? In order for Turkey to continue with its existing growth policies, it needs to import bio capacity from abroad. The news that 4600 million square metres of land was to be rented from Sudan and straw imported from Romania is still fresh in our minds.

Clearly the fast and stable economic growth trajectory championed as AKP’s biggest success is unsustainable both economically and ecologically. Existing growth policies are rapidly increasing the deficit in both the current account and bio capacity.

You can’t expect mincemeat for 5 dollars… nor coal for 24 dollars.

Following the Soma disaster, the words of the mine owner recorded in an interview with a journalist two years earlier provoked widespread reaction. In the interview, the mine owner explained with pride how coal that was extracted before privatisation for 140 dollars, was now being extracted by the private sector for 28.4 dollars. It is not difficult to see that this can’t be done without compromising on employee safety and the interests of the natural world, yet we are surrounded by products and services of this ilk. This is what the Fair Trade Movement that has sprung up in many parts of the world has been saying for years. Whenever it rains, it’s easy to find an umbrella on Istanbul’s Istiklal Street but it’s more than likely that, in order for everyone involved in its journey from the middle of China to Istiklal Street to make a profit, the interests of labour and nature have been overlooked. Consequently, we can clearly see that the global economic order itself is unsustainable. It is evident that there is a need for substantial change at the level of the global trade regulator, the World Trade Organisation. However, under the conditions of a global crisis that has become the bane of every country, to live in hope that international agreements can be a vehicle for correcting prices so that they reflect “real costs” is far too optimistic. In fact, the bilateral trade and investment agreements about to be signed between the USA and Europe, and the USA and East Asian countries are the most depressing proof that solving global problems with global solutions has been put on the back burner.

Returning to our subject, we need to understand that in a world where scarcity of every kind is growing in parallel with population growth, price increases are completely normal and cheapening prices means cheapening lives. Technological development alone has the power to lower prices but there is no chance of it being able to turn the tide. Prices need to go up but this does not automatically mean the average consumer consuming less. The reality is that in a world where wealth is rocketing and the billionaire list gets more crammed every year, there is more than enough purchasing power but it is concentrated in increasingly fewer pockets.

This brings us to the subject of fair share of income, in the sense that a country with an equitable division of income could not possibly produce coal for 28 dollars because it would not have a minimum wage of 1000 TL.

Monitoring is as important as regulation

No private company, or government that has bound its existence to the success of the private sector is fond of restrictive regulations, but there is an obligation to make them in order to fulfil the requirements of democracy and meet social demands. Returning to the relationship between the AKP and existing environmental and labour regulations, the SOMA disaster has brought to light arguments, surrounding the ILO Convention No 176 that Turkey has evaded signing for 19 years, which make everything glaringly obvious. The Minister of Employment, Faruk Celik, explains the ‘wrangling’ that takes place in the cabinet amongst different cabinet ministers and representatives from the private sector in order to get this kind of regulation through: to persuade the private sector into an agreement on safety in the mines is as absurd as trying to convince a cat not to touch the liver on the table. What did Minister Celik expect? Bearing in mind that up until now, not one company owner has been held responsible for a mining accident, what kind of coercion could possibly persuade the directors to sign up? To say that Faruk Celik should have resigned, long before today, after the meetings when he ‘failed in his persuasion’, is still naive in the reality of modern day Turkey.

There is one more important matter that has not been discussed – the level to which existing regulations are enforced is as important as the regulations themselves. Incomplete though they may be, a number of environmental and labour regulations do exist but only on paper. Ostensibly there are rules but monitoring does not exist. It’s as ludicrous as lowering the speed limit on the motorway to 90km and expecting drivers to conform to it without radar or police control. The results of the questionnaire carried out amongst business leaders every year by the World Economic Forum, which organises the famous Davos Meetings, demonstrates Turkey’s dire scenario. In answer to the question, ‘how strict are environmental regulations in your country,’ Turkey came 85th out of 145 countries. Amongst respondents to the question, ‘regulations are there but how seriously are they enforced?’ Turkey was in 67th position. Not only are environmental standards dragging on the ground, but enforcement of existing regulations is mediocre. Unfortunately, there is no indication that the predicament of labour and other areas is any more positive.

So what would we do?

It really is not that difficult to expand the economy! With Green Economic Transformation Policies, a more habitable Turkey is possible by 2030! We must remember that attempts at growth via the chosen sectors can only be made by disregarding the principles of economic, social and ecological sustainability. The question we need to ask is this: does expansion have to be dependent on these sectors? Or is it to feed these sectors that we should produce more electricity?

We can clearly see that Turkey’s need is not to produce more electricity but to use the electricity it produces more intelligently.

The aim of economic-only growth should be broadened out with the principles of social and ecological sustainability, whilst objectives that clash with social and environmental sustainability should be revised.

State support for mining and fossil fuel investment should be immediately removed and these and other sectors heavy on natural resources should be shrunk as part of a gradual plan.

The aim of being amongst the world’s leading producers of iron, steel, cement and energy should be scrapped. It is possible for a country dependent on outside energy to expand, not with energy intensive sectors but with sectors less reliant on natural resources which have a higher added value of being employment and eco-friendly.

In the process, the objective of moving to 100% renewable energy should be put in place.

All coal mining activities throughout Turkey should be stopped until ILO No 176 and similar agreements have been signed and legislation with effective monitoring mechanisms is fully functioning.

A public-private sector Ministry of Employment responsible for specific strategies and projects in areas of high unemployment should be established.

Employment should be created with public and private resources to anticipate job losses in the sectors that are to be shrunk. In Soma and similar places, eco- and employment-friendly green investment can be encouraged with public resources or private sector sponsorship.

For these projects to get off the ground Turkey needs to have the necessary financial muscle.

 

This article was originally published in Turkish for Yezil Gazete.