The Turkish precautions consist of one heat-sensitive camera that scans the hordes of passengers landing at Atatürk Airport. Anyone caught glowing with a bit of a temperature is pulled out of line for a swab test. But, then again, you can be incubating the flu without registering a temperature, so the camera is no real defense at all. What a pandemic implies is that there is no real effective way of sealing political borders against contagion. However, this does not mean the alternative is throwing up one's hands in panic. You can stockpile anti-viral medicines, draw up plans to slow the rate of infection by keeping people away from crowded venues and educate those who might contract the illness on how to obtain treatment without infecting others. It's a question of separating the symbolic gestures that give a false sense of security from the practical measures that might save lives. The balance is one of avoiding complacency but at the same time not rushing into over-reacting in a way that will cause problems in their own right.
This same sensible approach is necessary to deal with another sort of contagion that has no respect for international frontiers. That was the simple message I took away from a meeting last week organized by Koç University's Economic Research Forum and the Turkish Industrialists and Businessmen's Association (TÜSİAD). If economics is the dismissal science, then this was an example of those naturally given to pessimism at their very glummest. There was little disagreement that the Turkish economy was on the skids and would continue to contract next year as unemployment rose. The scariest part is that the road to recovery remains uncharted. The hard but clear options open to Turkey then, of engaging with massive structural reform and exploiting the weak lira toward export-oriented growth -- are not open to it now. The crisis is a world crisis and many of the key decisions will not be in Ankara, but in capitals elsewhere.
Economic guru Murat Üçer described Turkey's reaction to the crisis as a bit like the classic five stages of grief defined by the psychiatrists. It started with "anger" having been landed with a situation it did not feel it deserved, moved on to "denial" -- particularly with a local election campaign to fight -- and has yet to move on to "depression" and "acceptance." It is still on stage three -- "bargaining"; and the one with which it is bargaining the hardest is the International Monetary Fund (IMF). Certainly anyone attending the conference (including the now ex-Deputy Prime Minister Nazim Ekren) would be extremely skeptical of some of the next day's headlines, which described that Turkey's much-heralded deal with the IMF was almost done or that the worst of the crisis is over and that the economy will resume growing in the final quarter of this year.
The reality is that the Treasury is still balking at the difficult choices it has to make. How does one keep the economy stimulated and yet avoid the pitfalls of entering into a cycle of unsustainable debt? This is a dilemma that previous governments were reluctant to even acknowledge. They embarked on a downward cycle of debt and inflation that led to the 2001 crisis. That crisis and the misery it induced led in turn to the rise of the ruling Justice and Development Party (AK Party). Under IMF tutelage, the AK Party managed to restore credibility to the Turkish story and it is easy to understand their reluctance to have to bow their heads again. They fought the March local elections without signing back on to a stand-by agreement, but hinting to the markets that they might do so once the votes were in.
The suspicion is that the AK Party would like to play this game of finesse for as long as it can. Bringing Ali Babacan back to the helm of the economy is a way of signaling that prudence will reign again. On the other hand, Mr. Babacan knows better than most that the government still needs to borrow legitimation from the IMF. Announcing an agreement is just around the corner is spin, like saying that a heat sensitive camera will stop a pandemic in its tracks. Mr. Babacan's first job will be to show that he is really back in control.
