Political Power-Sharing and The Role of Institutional Checks and Balances: The Case of Turkey

Political Power-Sharing and The Role of Institutional Checks and Balances: The Case of Turkey[1]

Konstantinos Matakos[2] & Dimitrios Xefteris[3]

March 2013

Summary

This policy article discusses the relationship between institutional checks and balances and political power-sharing. By linking economic conditions with political outcomes we will also shed some light into the key role that institutional constraints play in determining the nature of electoral competition. As a result, we document the importance of institutional checks and balances in guaranteeing electoral and political power-sharing. We apply our analytical framework to Turkey as a case study.

Introduction

The interaction between economic and political outcomes has always been in the centre of attention, in an attempt to understand how political outcomes affect economic growth and development. The main hypothesis that drives recent empirical and theoretical research is that democracies and political systems that foster pluralism are on average performing better, in economic and social terms (e.g. Acemoglu and Robinson 2012). Nevertheless, the relationship between economic and political outcomes is certainly bi-directional. Not only the quality of political institutions and the degree of democratization and political power-sharing affects economic growth but the opposite is also true. In fact, this is a point we raise and analyse in our original paper (Matakos and Xefteris 2012)

Before applying our analytical framework to the case of Turkey, we provide a brief outline of the literature and of the key idea behind it. Our original paper[4] (Matakos & Xefteris, 2012) explores whether dominant parties[5] (or political elites for that matter) can exploit the power that inclusive economic institutions offer (e.g. redistribution) and capitalize on economic adversity in order to score opportunistic (electoral) gains and consolidate their rule. The answer to this question can shed some light on the necessary conditions for political and economic success. As a result, our framework highlights the importance of institutional checks and balances in guaranteeing political power-sharing and has important implications on the design of policies and institutional arrangements. Next we present a brief review of the literature.

In their recent book Why Nations Fail Acemoglu and Robinson (2012) note that: “[E]xtractive rules are self-reinforcing. In the Spanish New World, plunder and economic malaise further empowered the elite. […] Inclusive economies […] succeed in keeping economic and political power dispersed”. It is exactly this part of the relationship that runs from economic institutions to political outcomes, as measured by the dispersion of electoral power among political parties that is vital for our analysis. Acemoglu and Robinson (2006) show how general interest political considerations (e.g. avoiding a costly revolution) forced political elites and dominant parties to introduce more inclusive power-sharing economic and political institutions that ended up expressing the median voter’s preferences for more redistribution. Our model (Matakos and Xefteris 2012) strengthens this point by highlighting the partisan, opportunistic incentives that dominant parties and political elites have to exploit economic malaise for own electoral benefits, by promising more generous redistribution, especially in the presence of functioning economic institutions but low institutional checks and balances that place minimal limitations to the opportunistic behavior of dominant parties. Thus, our work supplements Acemoglu and Robinson.

Overall, our project[6] highlights the role of institutional constraints (e.g. fiscal and monetary policy rules, independent monetary authorities, constitutional constraints) and inclusive institutions in determining the structure of the party-system and the distribution of political power. In the next section, we apply this framework to the case of Turkey, in light of the recent debate over the new constitution and its provisions on institutional checks and balances.

Turkey at Crossroads: Lessons from Greece

Our model, although was not designed to do so in the first place, can have an interesting application to political and party-system of Turkey. Turkey is a fast-growing economy, whose economic market institutions are compatible with those of many other EU countries (labour market flexibility, private tertiary education, industrial relations etc.), if not superior to some of them (e.g. Greece). Therefore, the recent Greek financial tragedy, the most dramatic political and economic collapse of an advanced democracy after that of Argentina, can have important lessons to take-away. Acemoglu and Robinson write (for Argentina): “But extractive growth can’t last […]. When you have a combination of extractive political institutions but somewhat inclusive economic institutions […] there are two ways to go, but only one leads to sustained economic growth. You can open the political system and try to move towards an inclusive society, or you can go in reverse and clamp down on the inclusivity in economic institutions giving up prosperity for power.”

The above narrative could very well fit the Greek political system. Greece experienced some periods of rapid economic growth (from mid 1990s to mid 2000s) and has inclusive economic institutions (being a member of EU per se). Yet, its political system is characterized by clientelistic relationships and a lack of political power-sharing or functioning institutions. As a result, bad economic conditions (e.g. unemployment) have always been exploited by dominant parties in order to consolidate their political power via redistribution and clientelistic rents. This lack of institutional checks and balances (economic and political constraints on the power of dominant parties) generated a vicious circle between economic and political outcomes: opportunistic political parties exploited the absence of checks and balances and used economic institutions that were meant to be inclusive (redistribution, welfare state etc.) in order to consolidate their power leading to less political power-sharing and more clientelism and extractive political institutions. This vicious circle climaxed in 2009 when the shaky economic and political paradigm collapsed[7]. Hence, economic growth was not sustained due to a malfunctioning party-system. Moreover, our work, building on the rationale of Acemoglu and Robinson, can identify the causal parameters of this failure: the lack of institutional checks and balances that would have prohibited the opportunistic (special interest) usage of economic institutions for own political benefits. That is, it was an institutional failure that did not allow inclusive economic institutions to generate a more pluralistic and inclusive society. Rather, economic institutions became a tool in the hands of dominant parties in their quest for more political power.

The above discussion is highly relevant if one tries to transpose it into the current Turkish context. Currently, and despite recent economic progress, the Turkish party-system is not characterized by the same levels of stability, transparency and pluralism that one can find in many other European polities. In fact, power politics, social and political exclusion, clientelism and weak institutional checks and balances still dominate the political arena. However, a wind of optimism and positive thinking is blowing saying that Turkey will soon enough converge into an advanced democracy. If economic growth and inclusive economic and market institutions alone could lead to more inclusive, liberal and pluralistic society with advanced democratic processes then one would expect that Turkey will soon enough converge. Nevertheless, as our work points out this optimism seems to be incompatible with the institutional and political reality on the ground (e.g. restrictions in the freedom of press as was pointed-out by the ECHR report, lack of checks and balances, manipulated judiciary, political control over fiscal and monetary policies, current account deficits that are not checked etc.) Then one can ask the question: What can Turkey do the avoid regression in to the status quo ante?

Our work provides and institutional answer. If Turkey is to consolidate its economic prosperity, inclusive economic institutions must be coupled with an inclusive society and a pluralistic political system characterized by power-sharing. But how can this be achieved, given the clientelistic tradition and the ability of the current dominant party and political elite to exploit (as others did in the past as well) economic conditions and the absence of constraints in order to impose their own political imperium. After all, recent Turkish history is full of such examples of vicious circles of unconsolidated economic progress due to malfunctioning political and economic institutions. As this essay illustrated, opportunistic incentives are strong enough to tilt the balance towards the bad equilibrium. The answer that we provide is very clear: to consolidate economic progress that will lead to better political outcomes, a country needs to introduce strict economic and political institutional constraints. These will increase political power-sharing leading to more inclusive political institutions that will guarantee better economic outcomes and will generate a virtuous circle of consolidated economic and political progress.

In light of the above there are three clusters of intervention. The first one relates to enhancing constraints on economic policies. This is tantamount to increasing the political independence of the Central Bank (TCMB). Currently, Turkey is experiencing growth spurt fused by hot money and injected liquidity that is leading to deterioration in the Current Account balance. It is clear that other considerations than economic ones (mainly political considerations before the 2011 general elections) “forced” the Bank to engage in monetary loosening. This is further verified by evidence of increasing unemployment rates six months before the elections which then declined as the economy was over-heating, an outcome of monetary expansion (exactly as our model predicts).

The second intervention relates to the introduction of other forms of institutional checks and balances through the new Constitution that will guarantee political pluralism and checks and balances of political power. Examples could be a more decentralized federal structure (e.g. giving more autonomy to ethnic minorities), increasing the legislative control over the executive, delegating economic powers and budget control to local government etc. In the same vein, the introduction and the empowerment of various independent regulatory authorities (e.g. Competition Commission, Telecommunication Commission, Human Rights Commission, Independent Ombudsman, Public Administration Commissioner, an independent board for Public Sector appointments etc.) is another way of achieving the goal of increasing political power-sharing an limiting access of the governing elites to the economic resources for opportunistic purposes.

The final intervention relates to judicial reform and the freedom of press. Turkey has been recently criticized by the European Court of Human Rights (ECHR) for numerous violations of due judicial processes and press freedoms. An absolute imperative to functioning economic institutions, as the Argentine or the Greek experience has showed, are institutional checks and balances. The most important of them is an independent judiciary that will control the executive’s ability to expropriate or use economic and political institutions at will. To this aim the latest reform of the Supreme Council of Judges (HSYK) is an alarming event that increased the dependency of the judiciary to the government and the ruling elite. Finally, speeding up the EU accession process would have been the best way to guarantee an inclusive society and party- system with checks and balances. Far from the economic benefits, Turkey has much more to gain in the institutional and political framework if it were to become a full member. If the critical tuning point (Acemoglu and Robinson, 2012) on Turkey’s quest to manage to sustain economic progress is the quality of its democratic institutions and the consolidation of an inclusive political culture with increased power-sharing capabilities, then EU membership and the institutional checks and balances that provides (e.g. Hungary)[8] is the best guarantee for the continuation of sustained economic and political progress.

An Epilogue: Turkey where Next?

As we have argued in this article, it is very premature to predict the outcome of this ongoing power struggle in Turkey. As a result, the likely beneficiaries of this process are hard to identify. Perhaps the opposition will manage to consolidate the demands of the people in a coherent framework and negotiate with the (still all powerful) conservative majority represented by the AKP a new modus vivendi in light of the new constitution writing. Perhaps a more tolerant and pluralistic from Erdogan’s “ballot-counting” version of democracy, where different identities (be it ethnic or social) are respected and protected within the rule of law and where majorities do not aspire to impose their lifestyle to the minority and the authority of the state (a residual of the 1970s and 1980s military interventions whose infamous tradition AKP continued) will be subjected to the rule of law and more checks and balances might arise. That would be actually a tremendous gain for Turkish democracy and its people and would be a step closer to an advanced democracy (which despite Erdogan’s claims is far from being materialised in Turkey during his ruling tenure).

Konstantinos Matakos, Visiting Assistant Professor, University of Rochester and Dimitrios Xefteris, Lecturer, Department of Economics, University of Cyprus
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