Change of guard at economy’s helm?
As I was sitting down in front of my computer Friday afternoon to write Monday’s column on the Economics Nobel, I received a call that caused me to drop everything.
The caller told me the economy tsar Ali Babacan would be replaced by Zafer Çağlayan, the current economy minister, over the next few months. A few “312” calls to Ankara confirmed that the rumor has indeed been going around our nation’s capital.
The ruling Justice and Development Party (AKP) intends to stay in power for the next 10 years and beyond as all their documents are targeting 2023. They may succeed in that goal unless the opposition pulls its act together. It was already expected that Babacan would not be at the steering wheel of the economy, or even the Parliament, in the upcoming decade.
The AKP’s bylaws allow anyone, including Prime Minister Recep Tayyip Erdoğan, to remain as MPs for a maximum of three terms. Unless they change their internal regulations, Erdoğan, Babacan and many of the AKP’s bigwigs will not be able to run in the 2015 general elections. But that is still more than two years away, whereas a cabinet reshuffling could take place in the next few months.
There has actually been speculation of a change in the government for some time. The idea is that since they wouldn’t be able run again for the Parliament, the Party’s top brass would become mayoral candidates in major cities. Some claimed Babacan would aim for Ankara, but he put an end to the rumors by saying that he would return to his family business upon completing his term.
In any case, I am more worried about Babacan’s replacement than seeing him eventually leave. I have to be blunt; Çağlayan would be a terrible choice. For one thing, Babacan has gained the confidence of investors and markets during his decade-long tenure, ignoring his brief stint as minister of foreign affairs.
That trust was earned through smart policies, not smart suits. In fact, the Turkish finance community had initially nicknamed him “Baby John,” referring to his young age, youthful appearance and education and experience in the U.S. Opinions about him changed as he stuck with the post-crisis economic recovery program and cured Turkey’s Achilles’ Heel by putting the macroeconomy in order.
Loyal readers might see me as a perennial whiner, but my criticisms on monetary policy, the lax budget and lack of a structural reform agenda are small details when compared to the big picture- which is that Babacan will more or less get it right at the end of the day.
Unfortunately, I cannot say the same for Çağlayan, who has all the traits of a typical populist politician. As I am writing this column he is on TV criticizing the “independent” Central Bank for not having lowered interest rates enough on Thursday. While he cannot fire Governor Erdem Başçı, whose term ends in 2016, he would undoubtedly put more pressure on the Bank if he directed economic policymaking. He would also probably go for a pro-growth agenda instead of trying to mend Turkey’s vulnerabilities.
Even if the reshuffle has only a 10 percent probability, it would still be the biggest risk facing the Turkish economy over the next year.