The global investment firms of the Middle East are rounding on Turkish President Erdoğan for removing yet another central bank governor, after he raised interest rates to 19% last Thursday.
These asset managers for the mega-rich of the Gulf advise their clients to eschew Turkish equities and its real estate market, and discard all investments and bonds.
Altogether, they attack the Turkish President for seeking to cut interest rates, lamenting his economic acumen.
I am no admirer of the autocratic leader, but why lambast him alone? Why not virtually every other economy, save two, that have taken actions to significantly cut interest rates through the pandemic?
Japan, Sweden, Switzerland and all 19 Eurozone nations have taken interest rates below zero. The Bank of England cut rates from 0.75% to 0.1%. The US Federal Reserve cut interest rates to between 0% and 0.25%.
These global investment firms act as is if we are not in the midst of a global pandemic, a transnational health emergency and the worst global recession in a century or more.
Clearly, what a central bank does when the economy is growing and in good condition is completely different to its actions in a downturn, when they seek to stimulate local economic activity.
Other than Nigeria and Argentina, which other economy of any note considers raising interest rates the right course of action in the current climate?
At a time as precarious as this, with mass unemployment on the cards, ordinary people’s livelihoods on the line and indigenous businesses struggling to survive, most economies are taking action to help bolster their local economy. Few are thinking of global investors right now, and some are actively discouraging investors from flooding their internal market.
The financial sector was poised to benefit from high interest rates. They are understandably shaken and annoyed, but perhaps it is time for international investors to review how they engage with emerging markets.
To be sure, I am no unabashed supporter of the administration — I worry about the hyper capitalism, the massive debts and mega projects, not to mention ultra-nationalist shenanigans — but investors behave as if they are owed more than the ordinary citizens of the state.
In most states, rentier capitalism just is not working for the majority of citizens, leading instead to obscene inequality, poor productivity and a deterioration of democracy. Somehow economies must recalibrate.