The rise of a new economic paradigm
I think the days we are living in cannot be explained and analyzed with the quantitative methods of economics or finance alone. The developments in Europe and the U.S. alone clearly indicate this. The world is heading toward a new balance, or more precisely toward a new economic and political paradigm. In this respect, the current debates on exchange and interest rates in Turkey are essentially a debate on this new equilibrium, regardless of the current state of affliction.
From this standpoint, leaders' transformative political rhetoric highlights long-term dreams and objectives especially in such periods, while the position and rhetoric of technocrats is stuck in daily or even instantaneous solutions - two views that usually clash with each other. Here, the trouble is to mistake a long-term and comprehensive paradigm solution for short-term palliative solutions. After a certain point, however, the vision of the dominant politics meets with the operational and technical side at a point. This, of course, corresponds to a whole new balance.
Certainly, we are quite far from this point. As I said above, the conflict between the long-term objectives of transformative politics and the short-term interests of on-the-spot bureaucracies or conservative politics are the characteristics of such periods. President Recep Tayyip Erdoğan's remarks about the economy find credibility in the eyes of the nation, however, they cannot find credibility in conservative politics and bureaucracy that even oppose his views openly or implicitly. I think this is a reflection of such a perspective.
In this sense, Erdoğan's statements about interest rates are an expression of an economic model or even a new economic and political paradigm, rather than a palliative solution offer. This is why his motto "The world is bigger than five" and his approach that rejects interest-oriented financial growth complement each other. This human-centered approach highlights an inclusive growth model and rejects the interest-oriented financial growth, which is one of the most important exploitative instruments of the system at the moment.
Today, we can determine the development levels of countries through qualitative and quantitative data which dates back before the 2008 crisis. Therefore, we cannot forecast exactly where the capital will be concentrated when this crisis is over and the world achieves a new state of balance. However, we are observing that the world's production center is shifting to the East from the West.
This situation, beyond any doubt, is a state of war. Furthermore, we can define it as a transition to a new war on sharing. Even the state of current exchange rates alone tells this.
The new U.S. President Donald Trump, who has not spoken so much as he has not officially taken the office yet, is not very careful about China. On his Twitter account with 16 million followers, Trump said: "Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn't tax them) or to build a massive military complex in the middle of the South China Sea? I don't think so!" Quite interestingly, however, soon after Trump's tweet, the Chinese yuan continued to decelerate against the dollar at record-high levels. In other words, the yuan's deceleration increased as Trump criticized China for devaluing its currency. Undoubtedly, this criticism describes a much longer-term new economic and political stance of the U.S. Trump did not make this statement to lead to a decline in the yuan. Perhaps his point was that "The U.S. only controlled the Pacific region during Barack Obama's term, but now we will respond to it as well."
To what extent Trump's response will serve is a point of another debate, however, it is clear that the U.S. will try to overcome the crisis on the basis of the U.S. economy during Trump's period. The U.S. will also take advantage of having a reserve currency. It manages this by keeping the dollar high and tries to control it by attracting capital to itself. However, the U.S. cannot continuously do like this. Just like any other country, the U.S. cannot provide its internal financing by attracting the overvalued currency to itself with high interest rates. Trump complains about two things: First, he asks why China keeps the value of its currency low. Second, he asks why China behaves like this although the U.S. does not apply customs duty to the country. In this case, the U.S. must compete with the world in commodities and services, which are subject to foreign trade, in order to close its huge deficits. It cannot close these deficits by issuing dollars anymore.
For this reason, Trump also opposes all the drafts and preparations about trade agreements made during former presidents Bill Clinton and Obama's periods. Indeed, he wants a new global trade and monetary order. He knows that the old system will not work and that countries like China will seize the system from the U.S. and turn it in favor of their own interests as they gain power. In fact, like Trump, Turkey also opposes this old system, in addition to the Customs Union with the European Union and the old trade and monetary system, and wants a major reform in this area.
Every passing day reveals how we are right in this desire. Italy's referendum over constitutional reform, which resulted in Prime Minister Matteo Renzi's resignation, has brought the EU one more step closer to the inevitable end. This result will further deepen the gap between the northern wealthy European states, which dominate the EU, and southern European states which are increasingly becoming poor, and will reveal the need for a new union including Turkey. Following this result, not only negotiations with Turkey, but the EU itself has frozen. Eastern and southern Europe's need for Turkey has increased even further. Wealthy northern Europe is increasingly becoming isolated.
From this standpoint, leaders' transformative political rhetoric highlights long-term dreams and objectives especially in such periods, while the position and rhetoric of technocrats is stuck in daily or even instantaneous solutions - two views that usually clash with each other. Here, the trouble is to mistake a long-term and comprehensive paradigm solution for short-term palliative solutions. After a certain point, however, the vision of the dominant politics meets with the operational and technical side at a point. This, of course, corresponds to a whole new balance.
Certainly, we are quite far from this point. As I said above, the conflict between the long-term objectives of transformative politics and the short-term interests of on-the-spot bureaucracies or conservative politics are the characteristics of such periods. President Recep Tayyip Erdoğan's remarks about the economy find credibility in the eyes of the nation, however, they cannot find credibility in conservative politics and bureaucracy that even oppose his views openly or implicitly. I think this is a reflection of such a perspective.
In this sense, Erdoğan's statements about interest rates are an expression of an economic model or even a new economic and political paradigm, rather than a palliative solution offer. This is why his motto "The world is bigger than five" and his approach that rejects interest-oriented financial growth complement each other. This human-centered approach highlights an inclusive growth model and rejects the interest-oriented financial growth, which is one of the most important exploitative instruments of the system at the moment.
Today, we can determine the development levels of countries through qualitative and quantitative data which dates back before the 2008 crisis. Therefore, we cannot forecast exactly where the capital will be concentrated when this crisis is over and the world achieves a new state of balance. However, we are observing that the world's production center is shifting to the East from the West.
This situation, beyond any doubt, is a state of war. Furthermore, we can define it as a transition to a new war on sharing. Even the state of current exchange rates alone tells this.
The new U.S. President Donald Trump, who has not spoken so much as he has not officially taken the office yet, is not very careful about China. On his Twitter account with 16 million followers, Trump said: "Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn't tax them) or to build a massive military complex in the middle of the South China Sea? I don't think so!" Quite interestingly, however, soon after Trump's tweet, the Chinese yuan continued to decelerate against the dollar at record-high levels. In other words, the yuan's deceleration increased as Trump criticized China for devaluing its currency. Undoubtedly, this criticism describes a much longer-term new economic and political stance of the U.S. Trump did not make this statement to lead to a decline in the yuan. Perhaps his point was that "The U.S. only controlled the Pacific region during Barack Obama's term, but now we will respond to it as well."
To what extent Trump's response will serve is a point of another debate, however, it is clear that the U.S. will try to overcome the crisis on the basis of the U.S. economy during Trump's period. The U.S. will also take advantage of having a reserve currency. It manages this by keeping the dollar high and tries to control it by attracting capital to itself. However, the U.S. cannot continuously do like this. Just like any other country, the U.S. cannot provide its internal financing by attracting the overvalued currency to itself with high interest rates. Trump complains about two things: First, he asks why China keeps the value of its currency low. Second, he asks why China behaves like this although the U.S. does not apply customs duty to the country. In this case, the U.S. must compete with the world in commodities and services, which are subject to foreign trade, in order to close its huge deficits. It cannot close these deficits by issuing dollars anymore.
For this reason, Trump also opposes all the drafts and preparations about trade agreements made during former presidents Bill Clinton and Obama's periods. Indeed, he wants a new global trade and monetary order. He knows that the old system will not work and that countries like China will seize the system from the U.S. and turn it in favor of their own interests as they gain power. In fact, like Trump, Turkey also opposes this old system, in addition to the Customs Union with the European Union and the old trade and monetary system, and wants a major reform in this area.
Every passing day reveals how we are right in this desire. Italy's referendum over constitutional reform, which resulted in Prime Minister Matteo Renzi's resignation, has brought the EU one more step closer to the inevitable end. This result will further deepen the gap between the northern wealthy European states, which dominate the EU, and southern European states which are increasingly becoming poor, and will reveal the need for a new union including Turkey. Following this result, not only negotiations with Turkey, but the EU itself has frozen. Eastern and southern Europe's need for Turkey has increased even further. Wealthy northern Europe is increasingly becoming isolated.