Economic background of military coups

I am sure, foreign readers of Today’s Zaman are familiar with the events that took place from July 1996, which is the date of installation of the Refahyol government (a coalition between former Prime Minister Necmettin Erbakan’s Welfare Party [RP] and Tansu Çiller’s True Path Party [DYP]), to June 1997, the date of its fall. Erbakan was obliged to resign under strong pressure from the army, which used an array of tools, both legal and illegal. Now more than 20 general and officers in retirement are facing charges in connection with the 1997 coup.

My intention is not to discuss different political and legal features of this historical event but to focus on its economic background. Many participants in the debate over Feb. 28 coup d’état assert that the postmodern coup was not only illegitimate but also caused big economic losses.

The argument alludes to the successive financial crisis followed by severe recessions in 1999 and in 2001. To summarize, these crisis were provoked by sky-high real interest rates as well as by bank failures within the context of economic instability.

To put it crudely, I do not agree with this approach. I believe the responsibility for the crisis lies, for the biggest part, in the hands of Refahyol and its poor governance of economic affairs. In fact, the bad governance, in other words the populist way of governance, started as early as the beginning of the 1990’s, when the capital account was opened to international capital flows, while the pre-conditions of this audacious step were not fulfilled. I do not want to divert the attention of my readers to explaining subtleties of the ‘small open economy theory’ but let me just point out that this kind of opening requires healthy macro-economic fundamentals like low budget deficits, low inflation, low interest rates, and last but not least, a solid banking system. None of these were existing in the beginning of 1990’s, but further more the populism of former President Süleyman Demirel’s government (a centre right and left coalition) exacerbated the imbalances already existing.

The Refahyol government continued in this way and increased the amount of money being printed in order to finance a widening budged deficit. The Mesut Yılmaz government, which succeeded the Refahyol government, stopped the monetary financing and signed a staff monitoring agreement with the International Monetary Fund (IMF), but it was not legitimate and strong enough to use all other necessary ingredients, like budget discipline and banking reform, to reinstitute confidence. Neither governments nor army can be blamed directly for the economic disaster. Indeed, the real responsibility was in the hands of the whole political establishment who were unaware of the new constraints introduced by the new economic regime, which was the open economy. My basic point is that, economic turmoil weakened civilian political power, which prevented its ability to resist the coups.

The Feb. 28 postmodern coup is not a unique example of this particular feature of Turkish politics. Each military coup after the 1950’s profited from similar economic conditions. This was the case for the May 27, 1960 coup. The power of the Democrat Party government (DP) was at bay in 1958 because of high inflation and lack of hard currency to pay for imports. The devaluation shock of August 1958, as the condition of the IMF stand-by, did cause a severe stagflation and the necessary complement of the devaluation, the fiscal discipline, could not be implemented by the weakened Adnan Menderes government. The March 12, 1971 coup arrived amid the devaluation of 1969. The Sept. 12, 1980 coup happened not only within the context of a political backlash, but also under the conditions of a severe depression. The inflation reached three digit levels, while the export coverage of imports was as low as 20 percent. It was impossible to satisfy the demand for intermediary goods, so industrial production was rapidly declining.

I can not speculate that if the economic situation was not quite as bad, military coups could not succeed or ever be planned. The fundamental motivation of a military coup was the control of the parliamentary regime by the army, with the help of the bureaucratic establishment of course, in order to preserve a limited democracy with limited individual liberties, as was projected when the Kemalist regime was obliged to institute minimum political plurality in 1946.

Having said that, I believe that the economic turmoil weakened civil governments and facilitated in this way the task of putschists who were searching for popular support. And I also believe that, if the Justice and Development Party (AK) government during its first years would not have succeeded in establishing economic stability accompanied by high growth, it would not have been able to resist the joint pressures of the army and the high judiciary during the presidential election episode of 2007, be able to win an electoral victory in July 2007, and finally, be able to survive to the closing trial of 2008.