On 31 March Turkey will go to municipal and metropolitan elections. The polls will be a test of strength for local level support for the ruling Justice and Development Party (AKP), and come amidst significant macroeconomic turmoil. Davide Luca and Melani Cammett explore new evidence suggesting the AKP may have significantly targeted public spending for political gain.
In Turkey over the last 12 months, inflation has climbed more than 11 percent, while the International Monetary Fund forecasts a meager 0.4% growth in per-capita GDP during 2019 (the world average is 3.7%). This macroeconomic deterioration follows a general slide in the quality of the country’s economic and political institutions. As fears persist over the strength of Turkey’s economy, how has the AKP managed public resources since its arrival into power in 2002? Do patterns of government spending reflect development and economic needs? Or have political priorities dictated how budgets are allocated?
New empirical analyses indicate that the AKP has systematically “picked” local economic winners and losers, strategically allocating public monies and resources to provinces for particular electoral reasons.
A critical decision facing governments around the world is how to distribute public resources necessary for development, given budget constraints. A wide-ranging body of scholarship explores how self-interested politicians affect the design and implementation of public policies for strategic reasons, beyond considerations of efficiency and equity.
Turkey’s public finances are highly centralised. For example, in 2005, the share of tax revenue of local governments on total tax revenue amounted to 7.6% – that is, nearly one fourth of Spain, half of Mexico, and one third of the average across OECD Countries. This strong centralisation of public finances offers Turkey’s national governments a chance to manage and target public resources beyond “good governance” principles. The AKP has been no exception. The Party’s de facto control over the national parliament has only heightened the center’s control over public finances, mastering the government purse to punish and reward voters.
In a recent paper, we analyse novel data from Turkey’s public budget and explore the rising consolidation of power by the AKP through the lens of distributive politics, aiming to assess how the ruling party has deployed public monies towards distinct political ends.
AKP strongholds were targeted with significantly higher amounts of government current expenditure, while provinces where vote shares for the AKP were below the party’s national average score have received more locally non-excludable, irreversible goods, such as infrastructure investment. This mixed-strategy targeting is evidence of “portfolio diversification”, in which different budget lines are exploited for distinct strategic objectives.
Reliably pro-AKP districts have been targeted with significantly higher amounts of expenditure in the areas of education – accounting for more than 35% of total spend – defense and, to a smaller extent, cultural and religious affairs. Our results also point to higher public order and security spending in strongholds of the far-right, notably of the ultra-nationalist Nationalist Movement Party (MHP), possibly with the goal of ‘winning the hearts and minds’ of voters who are ideologically close to the AKP, and who value order and security.
By contrast, even controlling for different levels of development and for a host of socioeconomic indicators, provincial strongholds of the main opposition party, the Republican People’s Party (CHP), were the biggest losers, receiving the lowest amount of spending from the central government across the majority of budget subcategories. For example, the difference between two hypothetical provinces where vote shares for the CHP are highest/lowest is almost 20 percent lower than average for current expenditure, and 120 percent lower in the case of capital investment.
From a policy perspective, these findings suggest that some sectors have been less prone to discretionary spending and investment patterns along partisan lines and therefore may have functioned according to a more programmatic logic, giving rise to more equitable improvements in economic and social outcomes. Other sectors, however, have been subject to deep partisan logics, with potentially more negative consequences for equitable and sustainable development.
Recent academic evidence supports these claims. In another recent paper we show that Turkey’s incumbent government has played a substantial role in influencing local economic performance on a discretionary basis, and beyond considerations of equity and efficiency. In particular, all else equal, battleground provinces where the electoral race for the AKP was closer have experienced significantly faster per capita GDP and employment growth rates. This variation across provinces also appears to have substantively important effects on development: our analysis suggests that a hypothetical battleground province – i.e. where the share of AKP votes is just below the national average – experienced faster per-capita GDP growth by more than 1.5 percentage points and yearly employment growth rates that are almost 5 percentage points faster when compared to districts with the lowest AKP vote share.
Throughout the 2000s, Turkey was portrayed as a model of social and economic success to other countries in the Middle East and North Africa region. Yet, the incumbent government and its economic development model faces criticism for corrupt practices and arbitrary decision making. Our evidence suggests that the strategic deployment of public funds, taxation, and regulation has affected not only individual firms and business groups, but has also shaped the development of provincial economies across the country – local winners and losers selected by their political orientations.
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
