The states of capital: Crisis, rate of exploitation, and unproductive capital in Turkey

As capitalist production relations deepen the inequalities between the center and the periphery, they condemn semi-peripheral countries like Turkey and Argentina to pay heavy prices. The decline in value-added production, the transfer of surplus value from the working class to the capitalist class, and the inflation of unproductive capital are the most prominent causes of the economic and political instability we are experiencing today.

Economic policies based on neoliberal financialization have found application in various forms since the 1980s. The liberalization of foreign trade in the 1980s was followed by the ultra-liberalization of capital movements in the 1990s.

In the 2000s, with the acceleration of privatizations through a new momentum in financial liberalization, infrastructure projects carried out by the state in cooperation with the private sector through external financing gained weight. After the 2008 global crisis, the interest of foreign capital focused more on unproductive areas such as finance, shopping malls, and real estate. This led to the acceleration of profit rates in the short term compared to the long term.

When foreign investors, to whom the private sector was indebted, wanted to withdraw their capital after the Covid pandemic, the sudden jump in the exchange rate jeopardized growth. In response, since the monetary policy implemented in a highly erroneous manner starting in December 2021 increased the inflationary environment, disinflationary policies that reduce the share of labor, similar to an IMF program, have been preferred since 2023.

THE CONTRADICTION OF VALUE ADDED AND SURPLUS VALUE

In a capitalist economy, value added increases with capital intensity. However, industrial production in Turkey is gradually weakening today, and value-added creation is falling. Areas such as construction and finance have replaced industrial production.

Surplus value is the portion remaining after the cost of labor is deducted from the total value produced by the worker. This is where the capital's profit originates. While the share of labor in the national income is decreasing in Turkey, the short-term profits of finance and construction capital in particular are increasing, which clearly shows that rates of exploitation are rising.

TURKEY'S PLACE BETWEEN THE CENTER AND THE PERIPHERY

Center countries create more value added through high technology and capital intensity. Periphery countries are sustained through low-intensity production and high rates of exploitation. In this picture, Turkey is positioned as a semi-peripheral country dependent on the European Union's production chain and the United States' financial system.

While China became a new power center by increasing its share in global value added from 5 percent to 14 percent between 2000 and 2014, Turkey has not been able to expand its industrial capacity; on the contrary, it has turned toward unproductive capital.

FINANCIALIZATION AND THE DECLINE IN PROFIT RATES

As we emphasized before, the 2008 global crisis and the Covid-19 pandemic accelerated financialization processes. Central banks such as the Fed, ECB, BOE, and BOJ have turned into the primary tools that direct capital to the periphery, beyond the IMF and the World Bank.

In Turkey, this process grew financial speculation instead of productive investments. Short-term profits obtained through banking, real estate, and construction made the economy fragile. While the profit rate of capital is falling on a global scale, this decline has been experienced much more severely in Turkey. Since inflation has remained high compared to other “semi-peripheral” and “peripheral” countries (officially around 30 percent), it is necessary to continue economic policies aimed at both the decline in profitability due to rising costs and the impoverishment of labor and the increase in idle labor. Yet, there are alternatives to this policy.

TURKEY'S CRISIS: UNPRODUCTIVE CAPITAL AND INEQUALITIES

The picture Turkey is facing today is clear:

• Value-added production is decreasing,

• The share of wages is shrinking,

• The rate of exploitation is increasing,

• Construction and finance are inflating instead of industry,

• Inequality in income distribution is deepening.

The city skyline rising with luxury residences and shopping malls is actually a symbol of unproductive capital. Yet, the working class is becoming poorer every day in the face of the rising cost of living.

CONCLUSION: CONDEMNATION TO THE SEMI-PERIPHERY OR A WAY OUT?

Turkey's position is determined by unproductive capital accumulation and a high rate of exploitation. This picture is not just a matter of technical economic management, but another result of class preferences and the relationship between capital and labor.

The way out is clear:

• An economic policy that rebuilds industry and introduces a restructuring that will bring food price increases in agriculture closer to global price increases(*),

• That creates value added for society and elevates the public sphere,

• That limits unproductive capital and codes the tax system accordingly (increasing the top income tax bracket, increasing corporate tax collections and rates, wealth tax, real estate value appreciation tax, etc.),

• That manages all informal elements that increase costs in cities through the state,

• That focuses on social housing construction and increases labor's share of national income.

Otherwise, Turkey will set sail toward new crises to escape its current ones as a “semi-peripheral” country on the periphery of “central” capital.

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(*) https://doi.org/10.70101/ussmad.1624742 You can look at our article on this subject via the link.