American economist Joseph Stiglitz placed emphasis on soaring unemployment and said that the global economy is facing recession, during his visit to Tokyo where he participated in Japanese Prime Minister Shinzo Abe's economy panel a couple of days ago. Stiglitz's utterance of these statements in Japan, which has come to bother the West in its economic policies, has greater significance than what these statements include. Just before the U.S. Federal Reserve (Fed) meeting, Bank of Japan (BoJ) Governor Haruhiko Kuroda said the key interest rate could theoretically go to minus 0.5 percent and the Japanese yen could decrease in value.
Under Abe's administration, Japan has displayed a new type of politics starting from the economy. Thus, it goes beyond the U.S. paradigm, which was imposed on it after World War II. It amends its constitution and questions economic policies that doom the country to economic stagnation and restrict capital exports. The West made fun of Abe's economic path, which they called Abenomics, and argued that these economic policies, which went beyond the Washington Consensus, would fail. Such claims came to nothing as Japan went its own way and began recovering more rapidly than the U.S. and EU economies.
Apparently, it was not easy for the Fed to hike interest rates following the European Central Bank's (ECB) radical move last week and Japan's insistence on negative interest rates. Considering the ECB and JOB's insistence on negative interest rates, we should not expect the Fed to take a step similar to the Reverse Plaza Agreement in 1995. As the correlation between inflation and interest rates in the global economy has broken now, developed countries cannot increase inflation and growth by reducing interest rates, and developing countries cannot reduce inflation by increasing interest rates. While anti-inflationist processes happen depending on the decrease of profit rates in developed countries, high inflation occurs depending on structural problems that stem from the high financial costs of enterprises and monopolistic market order in developing countries like Turkey. So, the Fed's move to hike interest rates is a suicide attempt not only for the U.S. economy, but also for the whole world economy.
Former U.S. President Bill Clinton from the Democratic Party made such a move in 1995. The U.S., which increased interest rates and revalued the dollar with the Reverse Plaza Agreement, entered the period of George W. Bush's administration, which survived thanks to militarism. In this period, Japan and Germany's exports increased, however, the U.S.'s exports in high-tech goods and basic products such as in the automotive industry dropped. So, the U.S. economy financed its deficits with the dollar, which was kept at an artificially high level demanded by countries with surpluses like China.
Now, China does not demand the dollar as it does not undersell its cheaply produced goods. On the contrary, it exports capital and purchases Western companies. Taking its budgets deficits into consideration, Japan increases its exports by underselling its high-tech goods and providing long-term financing for them. So, what should the U.S., which was hardly given a chance by Japan, do now? It has two paths to follow: First, it can return to the past and raise interest rates as it did in 1995, value the dollar and send off Germany and Japan. However, this path does not lead to a way out when we take China's and South Korea's dynamics into consideration.
It is not clear whether China and other countries that have surpluses will demand the dollar as before. So, we cannot suggest that the U.S. will go through a period similar to the Bush administration. For us, it is hardly likely that Republican presidential candidate Donald Trump, who is almost a caricature of Bush, will come to power in the U.S. This is why the U.S. points to a new era under Hillary Clinton's administration by "agreeing" with Russia in the Middle East and the Caucasus. This will be an era where the U.S. will compete with China, Japan and Germany and strengthen its alliance with the U.K. as closely as possible. Therefore, it will pursue new and more limited regional détente policies than in the Cold War period in countries like Russia on which it cannot close eyes.
In this regard, it is impossible for Russia to decide to withdraw from Syria irrespective of the U.S. In other words, this decision is not independent from the U.S. Moreover, it is not a coincidence that Russia's decision about limited withdrawal from Syria, the People's Protection Units' (YPG) utterance that it will declare a federal state in northern Syria and the recent terrorist attack that targeted almost the whole of Turkey happened on the same days. Cemil Bayık, one of the PKK's self-styled leaders, confessed that the PKK is a proxy organization that "aims to topple President Recep Tayyip Erdoğan." Wanting a Turkey without Erdoğan is like asking for a semi-colonized, dried up Turkey just like the Cold War-era Russia in the region spanning from East Europe to the Caucasus. This is what terror and its supporters aim, as they already confessed.
In this regard, the U.S. and the whole of the West must be against all terrorist attacks that target Turkey's stability. Moving Turkey away from stability and democracy will push Russia out of control and will leave the U.S. in a tighter spot in the face of China and Japan in the Asia Pacific in the long term.