TV screens and print media were full of coverage about the protests in Turkey this week. The pictures of protestors throwing stones & sometimes Molotov cocktails at the riot police and the riot police responding with tear gas and water cannons were riveting. No one had expected this from a modernizing economic success story like Turkey and that in itself might hold a key.
Everything we read in print and heard on TV was totally micro in its focus. Even the articles from think tank experts on Turkey looked at the issue from a micro, meaning narrow, localized Turkish focus. Most of these Turkish experts told us that the Gezki park issue was just the spark. The timber was dry, ready and bunched up. All it needed was an issue, a match to light the fire. Some experts tried to compare the Taksim Square protests to the Occupy Wall Protests in New York but they themselves realized that the comparison was lame. Most experts concurred that the Turkish protestors represented a very small sliver of Turkish society, even a smaller sliver than the Tahrir Square protestors in Cairo, Egypt.
1. The Art of Global Macro
In this article, we attempt to look at this Turkish issue from the art of global macro. This mode of thinking can sometimes lead to angles that appear weird or even outrageous at first glance. But then that is the specialty of Cinema, the ability to look at things from a very different angle. And, after all, our nom de plume is CinemaRasik.
Readers might recall that another exercise in global macro led us to ask Are Iran & Israel Destined to be Partners? The logic described in that article led to our concept of a tactical opportunity for a secret, indeed covert, deal between America, Iran & Israel. About 4 months later, came a supporting article by Stratfor’s Robert Kaplan & Kamran Bokhari. This week we found the following sentence in a Stratfor article:
- “the influential Saudi journalist Abdel Rehman Rasheed of Al Arabiya wrote in an article published June 2 that Tehran will try to reach an understanding with the United States and Israel to undermine the interests of the Sunni Arab world.”
In other words, influential Saudi journalists & geostrategic experts are now coming around to the point of view we reached five months ago via our global macro approach. In this article, we apply that approach to the situation in Turkey.
2. Protests about Corruption & Rape in India
Earlier this year, the world saw intensely emotional protests in Delhi sparked by the inhumanely barbaric rape-murder of a 23-year old Indian woman. Every major & minor newspaper, every TV station in America and Europe focused on these protests and came to immediate conclusions about the problems of Indian society and how the Indian youth were finally waking up. Everyone was totally convinced that these protests were about rape and the condition of women in Indian society.
We were not convinced and we wrote the following, on March 2, 2013, in response to a superficial article by Anne Applebaum in Washington Post:
Applebaum is also wrong when she writes about anti-corruption protests
and the recent protests against the horrific Delhi rape-murder as two
different outbursts. She is correct in stating “Hazare’s campaign has lost steam”
but totally incorrect about the reasons. We have begun to think that
neither protest was really about the visible cause. Meaning the protests
for Anna Hazare were really not about corruption and the protests in
Delhi were really not about rape or women’s rights. But this
anti-consensus discussion will also be left for another article on
That day is today because that discussion is the same as the discussion about the protests in Turkey. How could that be? After all, the ostensible reasons for protests in Turkey are so completely different than the 2013 protests against rape and the 2011 protests against corruption in India. This brings us to the old cliche about what you see, what you hear is what deceives you.
But even the eyes can see many similarities. The protestors in Turkey and India, as well as the initial protestors in Tahrir Square in Cairo, were mainly educated professional secular middle class people. Both Turkey & India are democratic societies where Governments are elected by the people in reasonably fair elections. Both Turkey & India are celebrated as economic success stories within emerging markets. Both have seen sizable inflows of foreign capital that has led to the development of a professional middle class.
Yet, it is that professional middle class that is seething with rage, the rage that the world saw this week in Istanbul and in January 2013 & August 2011 in Delhi.
3. Same Rage in Africa
Africa looks and probably is very different than Turkey & India to many readers. But Africa has come a very long way from where it was in 1980s & 1990s. Today, Africa is looked at as a region as big as India, with a billion people and with attractive opportunities for investments. Several African countries now proudly exhibit a young, professional middle class similar to their peers in Turkey & India. They must be optimistic about their future, right?
Wrong, according to Richard Dowden, director of the Royal African Society:
- “What shocked me in Lagos, Uganda and Nairobi was the fury of the young middle classes – the very people who are supposed to driving the new Africa into the 21st century. They were angry about the poor levels of education, about the lack of electricity, but above all about corruption at the very top. And they see the growing ranks of ill-educated, unemployable young people being churned out of badly-managed state education systems.”
In other words, the young professional middle classes in Turkey, India and Africa are all furious about the same problems – rampant corruption, huge wealth inequality, crony business-political nexus, crumbling infrastructure and a realization that they are falling behind both in their own expectations about their future and in comparison to others in the small political-business power class. The fact that they have done much better than their parents is no longer enough to feel good. The rage is fueled by their own rising expectations for themselves and their societies.
Then there is the sense of utter powerlessness. The young professional middle classes in Turkey, India and parts of Africa realize that they are a small sliver of their own societies which remain rural, conservative, and poor. The fact that these countries are electocracies adds to the sense of hopelessness in these younger professional middle classes. They have no democratic means of making a difference or even being heard in the electoral system. That is why you see them come out in the streets, parks and public squares in their major cities.
4. What is the Source and Why Now?
The megatrend of the past decade was the rise of emerging markets. It began in 2002 with global risk capital flowing in increasing amounts to emerging markets. New investment terms like Chindia, BRIC, Frontier Markets, TIMP (Turkey, Indonesia, Mexico, Philippines) came into usage.
Nothing feeds economic growth like cheap capital, plenty of cheap capital. So growth in emerging markets accelerated. Initially this boom lifted most sections of emerging societies. The younger educated middle classes were the first to benefit. Education became the road to a brighter more assured economic future and with that came a sense of being special, a sense of entitlement because of their exalted educated professional status.
But as the inflows of foreign capital continued rising and as the power class saw opportunities to become enormously wealthy, established political structures began to change. The political class transformed itself from previously corrupt takers of bribes from businessmen to becoming businessmen themselves. They awarded contracts to corporate entities that they themselves controlled via anonymous trusts or nominees.
A larger and larger amount of incoming capital and economic growth got diverted to the new politico-business class and the broad economies began becoming starved for capital. This is where the reality began to conflict with the rising expectations, the sense of entitlement of the young professional middle classes. Inflation began rising and the purchasing power of rising wages began proving insufficient for keeping up with necessities. And the necessities kept growing with the need for 2 cars, expensive schools to keep up with peers. But as long as the trajectory of nominal income growth was upwards and the professional classes felt reasonably sanguine about their future, the discontent was muted. No one wanted to rock the boat.
Then in 2011
and more obviously in 2012, the trend began changing. Emerging market
stock indices stopped outperforming developed markets, especially the
U.S. stock market. As a result, capital flows began reversing slowly in
2011, a little more rapidly in 2012. This year, the emerging market
indices are down 12% while the US stock market is up 12%, a huge
difference indeed. In other words, emerging markets have reversed back
to what they used to be called, submerging markets.
To many, the boom of emerging markets is slowly turning into a classic bust. The young professional middle classes no longer see a guaranteed rosy future ahead. Their expectations, desires and needs have been elevated to a new permanently higher plateau but their reality has worsened. Their sense of entitlement is being shattered and they are afraid of losing their dream. This fear, this anger about society that failed them and their sense of utter powerlessness is driving the fury we see in the streets on Istanbul, Delhi and the rage astute observers see in young professional Africa.
There is no real solution to this rage, to this problem. It is a consequence of the bust of the boom. What it needs first is time and second political leaders that understand the need to divert this rage to positive productive efforts to improve their societies.
So when we see protests in Turkey, we don’t listen to excited TV talking heads, we don’t just see local causes that seem so small in comparison to the rage of the protestors. We see a global phenomenon that is becoming common to all emerging markets, a pernicious fall in economic expectations, a concentration of wealth among the connected crony networks and a rise in rage among the young professional class.
Smart successful societies will manage this well and become stronger, others won’t. C’est la Vie!
Send your feedback to [email protected] Or @MacroViewpoints on Twitter