Professor Boratav: "Neo-liberal globalization no longer benefits the USA, but China and Southern Countries"
In the first part of this interview series, retired professor Dr. Korkut Boratav had offered his perspective on the significance of the Oxfam International report as it relates to income and wealth inequality and had contextualized these problems with a reflection on the modern history of capitalism. In this second part, Dr. Boratav continues his social and historical analysis, with a particular focus on Turkey.
With the crisis that we have seen in the Turkish economy in the last two years, the gap between the classes is growing. In the housing project designated for the middle class, many workers could not apply for loans due to their salaries. This again brings to mind the claim that there is no middle class left either in the world or in Turkey. Have the middle classes melted away? If so, why?
This question focuses on “the wide gap between the classes created by the crisis that has been visible in the Turkish economy in the last two years.” I prefer to carry this framework to the turbulent years to which the Turkish economy was dragged after 2015. The second period of AKP rule is in question. The results, I think, are a severe social crisis, including a shock of distribution into which the wage-earning classes are dragged.
This development was brought about by the "revision" caused by two factors in the economic policies of the AKP, which surrendered to the neoliberal prescription in 2003-2015. The first factor was the reflection of the stagnation of international capital movements since 2015 on Turkey. When we look at the previous and the following five-year averages, foreign capital flows into our country decreased by half. The growth momentum that external resource inflows brought to the economy by itself was also dragged down. In this changing environment, the neoliberal prescription gives priority to financial stability under the name of “inflation targeting.”
"IN THE REVISION OF ECONOMIC POLICIES, THE AKP'S ‘AIM TO PROTECT ITS POWER AT ALL COSTS’ WAS EFFECTIVE"
The second factor that triggered the revision in economic policies is related to the fact that the AKP fell into the minority for the first time in the June 2015 general elections. From that date on, “preserving power at all costs” has been the strategic goal of the AKP. It was deemed necessary to violate the criteria of the monetary stability principle restraining growth momentum. The autonomy of the Turkish Central Bank, which was expected to implement these principles, was to be revoked; the Palace was to determine monetary policy; interest rates were to be kept below inflation, and companies were to be pumped with unmeasured and cheap loans.
In this arrangement, the allocation of resources was handed over to the system of banks that provide unmeasured and cheap credit flows, and to companies fed by them. Let's summarize the macro-economic implications and distribution results: In 2016-2022, current account deficits rose; the economy went through three severe currency crises yet grew by 4.2 percent. The share of capital in net national product increased by 10.5 points (47.8% → 58.3%); the share of wages decreased by 9.6 points (39.5% → 29.9%). At the end of the period, inflation reached the 85 percent threshold and contributed significantly to the erosion of wages.
“THE EXISTING BALANCE STATEMENT SHOULD BE EXPRESSED AS A SOCIAL CRISIS, NOT AN ECONOMIC ONE”
Real wages per capita remained under pressure throughout the period because the decline in the wage share accompanied the increase in wage employment. According to the inflation data used, real wages per worker decreased by 15% or 25% in the last seven years. It is calculated that the average wage worker was impoverished in absolute terms in all three or four years of the period covered.
Inflation, which has accelerated especially in the last three years, has led to relative or absolute impoverishment in the non-wage classes and strata of our society, especially among the farmers, landless villagers, small producers, and the economically active population which constitute 20 percent of the "idle labor mass.” In my opinion, this balance statement should be expressed in terms of a social crisis, not an economic one.
These data show that the Turkish economy was able to grow at a moderate pace, contrary to neoliberal stability principles. However, it was a growth that only nurtured capital and spread absolute impoverishment in the crowded segments of our society, especially in the working class...
“A PERMANENT REPAIR CANNOT BE POSSIBLE WITH NEOLIBERAL STABILITY PRESCRIPTIONS”
It can be said that it will not be permanent and will end after 2023. But how? According to IMF predictions, elimination of the instability that Turkey has drifted into in the last seven years, within a neoliberal prescription, will be possible due to a stagnation of the economy within a 3% growth rate. This pace of growth would mean that the social depression conditions that Turkey is going through in 2023 will become permanent.
A legacy of underdevelopment which has not yet been overcome is experienced in the form of overcrowded idle labor reserves in the Turkish economy. A permanent repair is not possible with neoliberal stability prescriptions. A large-scale repair is required. The agenda may be to attract the potential contained in labor reserves to production and to a dynamic growth momentum. The first step will probably be taken with a much more radical move in the relations of distribution and production.
While the income gap in the world is increasing, there are developments that reverse the globalization dynamics that we have witnessed since the 1990s. The United States recently stated that incentives and tax reductions will be brought to vehicles produced in the USA in the near future. A similar stance is expected in Europe and China. In other words, countries have started to encourage production within national borders again. Has the global economy reached a new stage? How would you interpret this situation?
Neoliberalism, which I defined above as a design aiming at the unlimited domination of capital around the world, intensified in national economies in the first ten years. Step by step, it was carried to international economic relations by methods also known as globalization. First, protectionism in inter-country trade was ended. In the second stage, regulations and restrictions on capital movements were completely lifted.
Liberalizing foreign trade and capital movements in forty years also effectively integrated the world labor markets. The prerequisite for the formation of a single worldwide labor market is free trade and unlimited freedom of capital movements.
Transformations in the socialist bloc also contributed to the formation of a single world labor market. The economic bloc that united Eastern Europe and the Soviet Union ended with real socialism; these countries also integrated with international capitalism and the labor market through free foreign trade and capital movements. Continuing under the rule of the Chinese Communist Party, China also completely liberalized foreign trade and capital movements. As a result of these transformations, around 2.4 billion workers from Russia, Eastern Europe, and China became part of the world labor market by participating in international supply chains.
“IMF AND WORLD BANK PROGRAMS IN THE NEOLIBERAL PERIOD DISTRIBUTED NATIONAL INDUSTRY UNDER THE LEAD OF THE STATE”
I assume this context brought with it an internationalized production and supply chain structure?
Yes, before neoliberalism, most of the Southern geography was following protectionist, planned, import substitution industrialization programs. In agriculture, incentive and support policies that protect food sovereignty and peasantry came to the fore. Labor markets were valid only at national levels. In the neoliberal era, the IMF and World Bank programs dismantled state-led forms of national industrialization. Industrial production, which remained within the country in peripheral countries, has also shifted into international supply chains controlled by international capital.
The main feature of these chains is to break up some stages of industrial production and move them to low-labor cost South and East geographies. Production was distributed between countries and integrated within companies. Laborers also became parts of the world labor market rather than the national labor market.
“THE OTHER SOURCE NUMERICALLY INCREASING THE WORKING CLASS: IMMIGRATION FROM SOUTH TO NORTH, FROM EAST TO WEST”
There is a second source that numerically expanded the world working class: immigration from the South to the North, and from the East to the West… The economic, political, and social depressions created by both neoliberalism and imperialism in the global south were influential in them. The dissolution of national industries in the global south was followed by the opening of agriculture to international trade. In many self-feeding countries, grain producers switched to commercial agricultural products. While the south was an exporter of these products, it had to import the subsidized and productive grains of the West. The south faced risk of starvation.
After 2000, millions of people who were affected by the aggression and destruction created by imperialism in all peripheral countries, especially in the Near East and Middle East countries, joined the economic shocks that neoliberalism created in the South and East. The laborers who were separated from their countries by neoliberalism or imperialism migrated to the Western and Northern countries. The percentage of economic migrants and asylum seekers in these countries rose rapidly. They joined the world labor markets as low-wage workers in Western countries.
We are also experiencing the striking political consequences of this great transformation for the developed Western countries. The losses of the Western workers who moved to the supply chains in the outside world in the last quarter century have intensified in the face of the competition of the black-skinned and dark-skinned workers flowing from the Southern geography. The competition in the labor markets of the Middle East, Africa and Latin American laborers who migrated to Western Europe and the United States has put pressure on wages.
The uneasy workers of the North have been left unaffiliated due to the disintegration of traditional leftist politics. The ruling classes have given priority to the liquidation of the organizations and currents that carried the accumulations of the traditional left. One result of this is neo-fascism, which has risen in the West and gained respect in a sense because it is called "populism.” Republican and conservative parties, representing the center-right mainstream in the US and Britain, turned to neo-fascism under the leadership of Trump and Johnson. Rife with racist, xenophobic, and anti-globalization rhetoric, they received widespread support from the ranks of the working class.
“NEO-LIBERAL GLOBALIZATION NO LONGER BENEFITS THE USA, BUT CHINA AND SOUTHERN COUNTRIES”
Within the EU, neo-fascist parties are in power or are candidates for power in Italy, France, Germany, Spain, Scandinavia, Poland, and Hungary. All of them have ideological and political elements of fascism; neoliberalism's prescriptions for globalization are being rejected or discredited.
The free trade doctrine, which is one of the main pillars of neoliberal globalization, is no longer useful to the US, but to China and the Southern countries that are increasingly following it. The US has been defeated by the competitive power of China, with its low labor costs and technological breakthroughs. The US tries to attract Apple, which produces in China, to itself with trade wars or tax incentives; but it fails.
We are going through a period in which the economic contradictions of capitalism are intensified and the dispersion that I mentioned in the second question in the search for solutions is becoming widespread. Add to this imperialism’s bloody devastation of the 20th century in the Middle East and the recklessness which brought the world to the brink of nuclear catastrophe by triggering the Ukraine war.
I think we are in the midst of a crisis brought on by a sickly, rotten system.