Prof. Dr. Mehmet Şişman: 'Neoliberalism not only deepened inequality in Turkey — it is also eroding capital in the economy'

Interview: Osman Çutsay

Prof. Dr. Mehmet Şişman, a faculty member at Marmara University, argued that strengthening the Republic's secular, individual-liberating dimension and making an effort to protect the public sphere 'would do the economic situation good.' Prof. Dr. Şişman answered our questions on the crisis and the paths to a solution.

- The value of the US dollar against the euro is well known. It has been on a downward trend for some time. One euro is currently worth 1.16 dollars. This is a Trump policy. He plans to stimulate domestic industrial production — since imports will become more expensive. Likewise, since US-origin products will become cheaper, it is thought that sales in foreign markets could increase. But the US's position as a financial haven is at risk. Our question is this: Will the decline of the dollar not amount to a trimming of US power in the world system? Yet the Trump team is working toward exactly the opposite picture. In your view, what kind of transformation are we in the midst of?

Prof. Dr. MEHMET ŞİŞMAN - Yes, the US dollar has lost around 10 percent of its value since the Trump administration came to power for the second time. While the currency of the second-largest trading partner — the euro — is losing value against the dollar, there is not much movement in the Chinese yuan. Therefore, the US cannot exert much influence against the currency of the country it trades with most, namely the yuan, which is why customs tariff negotiations and rates opened at very high levels came onto the agenda. Despite negotiations, tariffs on goods imported into the US — particularly from the EU — have risen on average from around 4 percent to 12 percent, roughly a threefold increase. Since retaliatory measures have also been taken against US-origin products, price increases will also come onto the agenda for US exports. As a result, we will see a downward swing in world trade. At the same time, an increase in inflationary tendencies — though not as severe as during Covid-19 — will come onto the agenda.

SLOWDOWN IN THE WORLD ECONOMY, A FRACTURE IN THE US

The slowdown in trade is likely to be accompanied by a retreat in world economic growth toward 2 percent and a rise in unemployment. Stagflationary tendencies, as in the 1970s, will further deepen the fracture in US power. The US was already not at its former economic strength, and this will shrink the US's place within the world system a little further. Thus, the building blocks of a multi-bloc system will be relaid. The economic expansion of the China (and Russia) axis caused the US to panic in the military sphere and to accelerate its military operations (together with Israel) in various parts of the world. Ukraine, Gaza, South Sudan, and the Caucasus are all simmering. Military competition cannot sustain the economic sphere for long, so the economy will react after a while. That reaction has already begun. The recession delayed by the US's Ukraine and Gaza operations is drawing even closer with the Trump administration's non-market interventions.

- If the Pax Americana and the neoliberal era are ending, what kind of Keynesian model will replace them? What kind of dollar policy would a militarist Keynesianism entail? What tools do the US and the EU have at their disposal in this age of militarist investment, and where does this road lead?

Prof. Dr. MEHMET ŞİŞMAN - A return to the Keynesian model looks difficult. Although the economic conditions 

resemble the 1970s (stagflationary), the political structure is entirely different. For that reason, even if the starting point is Keynesian, Kaleckian policies that go well beyond Keynes are on the agenda. Post-Keynesians have been working on these. This time, some developments beyond the strengthening of the public sector and military Keynesianism may be possible.

THE WEST'S TASK IS HARDER

Both the Covid-19 pandemic and the experience gained through the recent Gaza genocide and the war in Ukraine have shown us that the state has shrunk sufficiently and that a public sector with a broader economic footprint now needs to be created. Theory is keeping pace with this, recommending a developmentalist state — close to Marxist analysis — for developing countries. They cannot make do with the military sphere alone in managing aggregate demand. Nor should they. The expansion of military investment in the West will reduce the resources going to social spending in the world economy, and this will sharpen the class struggle. As happened earlier with Lula and Chávez, the growth of the Latin American left could occur in the wake of the Milei disaster. The US's attempts to produce and sell more weapons and to constantly erect a protective 'wall' will not be able to stop this process. Unfortunately, totalitarian and authoritarian regimes will be able to make an appearance for a while longer, but a very long-lasting effect cannot be expected; for since global chains bind the world and corporations together and capital will look coldly on falling profits, creating a new arena of power struggle through the state will not be a long-term proposition under capitalism. China, for example, is aware of this and  is integrating into capitalism through a network of relationships that does not neglect social investment. That is why its hand is stronger. We observe that countries like Russia, in their partnership with China, also pay attention to this aspect of the matter. In this sense, the West's task is harder. On the one hand, sustaining the old world order and generating power, and on the other, maintaining internal balances — both are more difficult.

- How does this volatility in the dollar affect Turkey? Is the Turkish economy in the dollar zone or the euro zone? Germany is the most important external hub for the Turkish economy in terms of industrial and commercial companies. How might the euro-dollar rivalry affect Turkey?

CURRENT ACCOUNT SURPLUS IN THE EU, CURRENT ACCOUNT DEFICIT IN THE US

Prof. Dr. MEHMET ŞİŞMAN - Turkey is one of the countries whose economy is most affected by the euro/dollar parity. On the one hand, it tries to gain a competitive advantage for exports as the euro rises; on the other, it may witness a decline in the value of its debts as the dollar falls. How long-lasting this will be is unknown; however, the EU's current account surplus and the US's high current account and budget deficits opened this path. A likely decline in the dollar's value looks even more plausible alongside a likely cut in the Fed's interest rate (currently around 4 percent, with inflation at 2.7 percent). This is not, at least when oil prices are taken into account, a negative situation for Turkey. That said, the Turkish economy has a great many problems. Its goods are not competitive against China. Moreover, very high budget deficits and a current account deficit with a high probability of widening at any moment continue to be a headache. The gradual shrinkage of industry is moving in direct proportion to the high level of interest rates and inflation. 

This brings broadly defined unemployment to approximately one-third of total employment (32.9 percent). The rise in broadly defined unemployment, combined with high inflation, is Turkey's most pressing problem. Short-term capital inflows create a weak effect on employment growth while deepening the 'sitting on pins and needles' position. An increase in long-term investments also looks difficult in the near term. Could developments beyond the increase in transit passengers in particular come onto the agenda in terms of logistics? It is possible, but only if the legal infrastructure also helps. Could Germany's economic stagnation and its increase in military investment be a source of hope for Turkey? It does not hold much promise, since investing in Eastern Europe is a more likely option for Germany. However, Turkey's growing political and military importance could serve as an obstacle to its economic difficulties for the West. Capital flows to Turkey will continue, even if not in large volumes. Foreign trade and debts could increase further in the European direction.

NEOLIBERALISM AND TURKEY

- In order for republicans and the defenders of the Enlightenment's historical gains in Turkey to preserve them, do they need to break out of neoliberal barbarism through a Keynesian militarist  leap? Is this possible? We have a body of revolutionary intellectual thought that deserves to be taken seriously, which argues that this great collapse cannot be averted without feeling the breath of socialism (central planning). These people are also searching for a remedy on a broad arena. In your view, what steps can be taken toward a liberating, equality-providing form of planning?

Prof. Dr. MEHMET ŞİŞMAN - What neoliberalism has done is plain to see. In Turkey, it not only deepened inequality — it is also eroding capital in the economy. For that reason, the necessary conditions for a new revolutionary ignition have formed. This also appears possible through the votes of our people. Postponements of strikes and the decline in real wages are making life increasingly difficult for the working classes. As for our intellectuals, they will write more and engage more deeply with social problems. For the hegemonic competition among global powers could lead to the foregrounding of local identities here and to the flourishing of new ideas — but only on the basis of secularism and the social rule of law. The Western intellectual has it easy. People who read and write in these parts produce ideas under harder conditions but have access to a more creative space. This space is made possible by taking Atatürk's Republic as a foundation and expanding rights and freedoms. Furthermore, the negative effect of commodification in the market must be neutralized by expanding the public sphere. We can advance as solidarity prevails over neoliberal competition. The competitive position in external markets is already shaped by the jostling of hegemonies. In short, on the one hand strengthening the Republic's secular, individual-liberating dimension, and on the other making an effort to protect the public sphere, will also do the economic situation good.

News Source: 12punto