We are getting poorer as we grow

We used to call it hormone-fueled growth. I believe it was 2005. Once again, under the propaganda that our economy was growing magnificently, a small number of economists were saying, "This growth is based on construction and imports. It is not sustainable growth; this growth is hormone-fueled,"we said.  For the last six or seven years, I have shifted from the definition of "Hormone-Fueled Growth"  to the definition of "Toxic Growth." 

If you ask what the difference is... During the years of hormone-fueled growth, even though the growth was not sustainable, certain segments of society were able to get their share of the increase in prosperity. Of course, with the exception of laborers and farmers. However, in the period leading up to 2015, although the share of labor income and farmer income in the national income declined, there was no absolute impoverishment in these segments. The reason for this is that these two classes were able to benefit from the consumption expenditures that increased through cheap imports. However, the source of this consumption increase was not income growth, but consumer loans. It is also possible to call this the drawing of the working class into the financial system as credit customers through credit cards, or getting them addicted to opium. Since 2016, however, sharp real declines in labor income,  losses at the level of 15-25 percent, and absolute impoverishment have begun.  The share received by capital increased by 10.6 percent. (A brief summary from Prof. Dr. Korkut Boratav's article, 'The Economic Balance Sheet of the AKP Government and Before,' Haber Sol, 14.04.2023) 

Professor Korkut Boratav's assessment is clear. In the period leading up to 2015, workers and farmers lost a small portion of their share of the national income, but they were allowed to benefit from consumption financed by the growing current account deficit by being "pushed into debt." In the subsequent years, in addition to increasing income losses, the working classes, now in a process of impoverishment driven by debt, are trying to make ends meet using multiple credit cards through a "robbing Peter to pay Paul" method. Nowadays, Mehmet Şimşek and the Central Bank, without looking at the budget deficits they cannot manage or the unbacked money they have printed, view the credit card spending of low-income groups as the cause of inflation.   

After the2015s, the impoverishment in the economy was not limited only to the labor sectors; the economy as a whole, "as the economy grows" fell into a debt trap. Under normal circumstances, economic growth brings increased prosperity and wealth. However, as our economy grows, we are witnessing impoverishment for all but a very small segment of society. The country's external debt, the public sector's debt burden, and household debt are all rising, while the real incomes of a significant portion of the population are falling, and the income of a small minority is increasing. According to TurkStat's income and living conditions statistics, in 2022, the income of 80 percent of the population decreased, 15 percent were able to maintain their income, and only 5 percent increased their income. If our debt is generally increasing and we are getting poorer as the economy grows, then that growth is no longer “Hormonal Growth” but rather “Toxic Growth,” like cancer cells. 

The data on growth also shows how unstable and sickly the economy is.  

When we look at growth by economic activity, the banking and insurance sector leads the way with 9 percent. It is common knowledge that the banking system's profits have exploded due to negative real interest rates and the burden of KKM (FX-protected deposit) risks being placed on the state. 

The 7.8 percent growth in the construction sector stands out. A typical AKP classic. However, we can consider the increases in the construction sector this year as normal due to the earthquake. 

There is a 0.2 percent improvement in agriculture. Growth in the industrial sector, which should be the engine of growth and employment, remains at a mere 0.8 percent.

When we look at growth by expenditure method, the picture is as follows: Household consumption expenditures, with a 12.8 percent increase, and an 11.7 percent rise in imports have been the driving forces of growth. The indicator of the underlying illness is that while consumption fuels growth, industrial production has increased by only 0.8 percent, and agricultural production has declined. Despite very high negative interest rates on loans and an increase in demand, industrial production and investments simply refuse to rise. 

Another error is this: While a significant portion of society is experiencing severe poverty, this observed increase in household consumption is being driven by a very limited segment of the population. The total demand from the working class is falling. However, both Mehmet Şimşek and the Central Bank fail to see the reality behind household consumption expenditures in their fight against inflation, and they are developing policies aimed at curbing the demand of a broad segment of society. The truth behind the increase in household consumption is very simple: They raised interest rates to 45 percent, but interest rates remain negative relative to real inflation, and the high-income group is not saving but continuing to consume. Secondly, it is not just the high-income group, but also the money laundering and the financial traffic of refugees that are increasing total demand...

Another objection I have regarding the growth data concerns the national income per capita. According to TUIK, our national income measured in dollars is 1 trillion 118 billion dollars. Our national income per capita has increased by 2,400 dollars compared to last year, reaching 13,100 dollars. I wonder whose per capita national income has increased by 2,400 dollars a year. The real incomes of minimum wage earners and retirees declined by 41 percent in 2023 according to ENAG inflation, and by 19 percent according to TUIK inflation. (I explained the details in my article in 12 Punto on February 11).

They calculate the national income per capita based on a population of 85 million. However, there is a population in Turkey exceeding 10 million, or even reaching 15 million, whom we call "refugees" but who have actually become settlers. In this case, if you divide the national income per capita not by 85 million but by 95 million, the figure drops from 13,100 dollars to 11,700 dollars. I have one more objection to this figure as well. You are suppressing the dollar exchange rate. The dollar exchange rate you take as the annual average  23.49 TL... If the dollar had not been suppressed, our national income in dollar terms would have been lower. 

We should not look at the per capita national income solely based on our own increase or decrease. While we fluctuate between 17th and 21st place in the world in terms of total national income,  what is the situation regarding per capita national income?

Let us remind you immediately.

In 1980, we were 55th in the world.

During the crisis years of 2000-2021, we were in 71st place globally. 

By the time we reached 2022, the AKP had dropped us to 81st place, a position worse than the crisis years. According to provisional data for 2023, we are now in 94th place in the world.

If we calculate this not based on 85 million, but on 95 million by including the refugees who have now become permanent residents, we are most likely below 100th place in the world.

I am waiting with curiosity to see how voter preferences will form in a country that has impoverished so rapidly over the last 22 years.