With 25 percent inflation, people in Turkey also have to dig deep into their pockets for many everyday products. President Erdogan has increased control of prices, sends inspectors to supermarkets and calls on the population to report hefty surcharges. This is a massive intervention in the market economy – and rarely leads to the goal.
The political opposition in the country is cold, local critical journalists can only work under great danger. Now Recep Tayyip Erdogan – whose power has grown almost immeasurably with the introduction of the presidential system – has identified a new enemy. The free market economy.
Their mechanisms, which include the principle of supply and demand, could do more harm to the president than many might suspect. If energy and everyday necessities become increasingly priceless for people, their dissatisfaction could eventually turn against the autocrat himself.
The power man Erdogan knows that and suddenly intervenes in the free pricing – in addition to the free choice of profession and free competition, the central requirement for a free market economy.
Rigorously, the governors of all 81 Turkish provinces are to take action against businessmen and companies who have sharply increased prices for their products as a result of the dramatic devaluation of the Turkish lira. Controls and penalties will be tightened significantly, Erdogan said via Home Secretary Suleyman Soylo on Thursday.
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At the same time Erdogan called on the people of the country to buy only in shops with price-stable or price-reduced offer and to report conspicuous price increases in other shops. The denunciation in the autocratic system Erdogan thus gains a completely new dimension.
Already, hundreds of companies had been urged to justify their pricing policy to the Ministry of Commerce. Against this background, the call to the private companies in the country, in unison with the state-owned companies, to reduce the prices "voluntarily" by 10 per cent on a flat-rate basis, must seem like sheer mockery.
To make matters worse, in many cases companies have drastically increased their production costs due to the sharp decline of their own currency by purchasing the necessary input products from abroad. If they do not at least partially pass on these costs, the companies are in distress.
That traders and companies try to take advantage of these times of crisis to their advantage is very likely. For a long time, urban police teams of the "Zabita" have been touring the supermarkets and major retail outlets in the cities. Now they have tightened their controls in the country, as reported by media in Turkey.
Whether Ankara's attempt to make a lasting impact on the creeping political price control, economists do not believe. In history, politicians and despots have repeatedly tried to calm down the population through imposed price controls. "The result has always been devastating," the "world" quotes the US economist Thomas DiLorenzo. Flourishing black market, corruption and a deteriorated product quality were often the result.
The rate of inflation in Turkey has now reached 25 percent. An important cause is the sharp decline in the Turkish lira, which has lost around 40 percent of its value against the dollar since the beginning of the year. Rising interest rates in the US and the withdrawal of foreign capital from Turkey, which for a long time spurred the country's economic recovery, have aggravated the currency crisis.
But many investors are also withdrawing their money because Erdogan is trying hard to influence the independent central bank. Erdogan is an avowed opponent of rising interest rates in the country. Although it had recently raised interest rates against the President's stated will, it hardly had any effect on the foreign exchange markets.