Crony Capitalism and Emergence of a New Hegemony Assignment

Crony Capitalism and Emergence of a New Hegemony  Assignment Words: 3828

Large-size firms that had gained profit in the conjuncture with import-substituting development model, and in turn that became a part of old historical bloc in roll-back neoliberal capitalism lose their old shiny days due to transformation which was occurred in the way of Islamist capital owners’ and conservative political movements uilding a new hegemony over classes and constructing a bloc consisting of coherence Of material power, ideas, and institutions. This new historical bloc has risen from construction sector that has made it possible to create rent- creating crony capitalism.

Crony Capitalism and Its Historical Examples Crony capitalism is a mode of “capitalist political economic system where allocation and distribution of opportunities, interests, benefits or resources are overwhelmingly based on personal relationships… ” 1 It can further be defined to include “private-sector businessmen who benefited enormously rom close relations with leading officials and politicians, obtaining not only protection from foreign competition, but also concessions, licenses, monopoly rights, and government subsidies. 2 The key element of crony capitalism is to gain at ‘others’ expense’ . 3 The masses, who are casting their votes for the benefit of the opposition, believing in a religion different from what rulers believe in, or having different ethnicity from the elites, generate ‘other’ side of the crony capitalism. Despite the fact that the rulers may be changed due to the nature of emocracy, sometimes they cannot be at ease with this reality.

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In this scenario, there are two possibilities: It is either that they try to hold on to power by gaining voters’ confidence by developing healthy infrastructure, sanitary services, or life expectancy, etc. ; or they create so-called unsustainable high economic growth, using budget for ostentatious dispensable projects, and making a wealthy class dependent on these rulers. The former is the benign method of staying on rule and it demonstrates how democracy brings development; the latter, however, is used in democracies hat cannot be described as liberal or radical, and thus cannot be sustainable.

David Kang argues that “all Asian countries have been characterized by cronyism. Close personal or family connections have been central to political and economic life in Korea, the Philippines, and Indonesia. “4 In this paper will argue that a similar argument might also be applied to the Turkish case discussing the socio-economic dynamics under the ruling Justice and Development Party (AK Party), which for thirteem years in power has been constructing its own middle class, capital, institutions, and ultimately onsolidated its hegemony.

It is a contemporary issue in Turkish economic and politic agenda; and a case study out of East Asia might be useful to understand how crony capitalism might be extended towards other regions of the world There are two ways that the relationship between crony capitalism and corruption might be explained: rent-creating, and profit sharing. 5 In rent- creating corruption, cronies become successful in state tenders and achieve monopolistic advantages in different sectors.

This success stems from the political body that rent-seekers either overtly or covertly represent in the enders. Issues released by tenders are demanded by only cronies, so if there are any candidates to claim on an auction, they are directly excluded from the market, forced to become smaller agents in the sector; or financial investigators would be used to reveal an incorrectness within the candidate companies’ balance sheet. This final method was used in Turkey several times during the AK Party governments to marginalize the Istanbul bourgeoisie. For instance, during Gezi Protests, after Kog Group helped demonstrators that were against the authoritarian attitude of Erdogan, they were exposed to nvestigations by taxation officials. It is not to say that laic capital lost its hegemonic position, however it means that conservative capital gained a momentum which Islamists never witness in Turkey history. 7 On the other hand, in profit-sharing corruption, cronies are allowed to own some lucrative businesses that are potentially profitable. will use both to illustrate crony capitalism in Turkey.

However, because of the government’s choice about determining commanding height (construction sector), will focUS more on rent-creating rather than profit-sharing corruption. Crony capitalism is enerally identified with Asian countries such as Indonesia, Malaysia, Singapore and Taiwan, although Asia is not the only place to crony capitalism developed. The most known actor of crony capitalism is Indonesia’s Suharto family. Under President Suharto’s rule, Indonesia experienced both prosperity and crisis depending on his stability in power.

When Suharto was strong in his reign, Indonesia’s economic growth was astonishing, but after the rule became shaky, political and economic crises arose within the struggling country’. 8 Politics, bureaucracy, state banks, and technocrats as ell as policy-makers were all dependent on Suharto’s view about daily matters. 9 Suharto and India’s Indira Gandhi offered chances to be prerogative agents in car-production sector for their sons and these exemplify other two cases of rent-creating corruption. 10 In Malaysian case, state and businessmen constituted a link to bring about economic growth under the New Economic Policy during the 1 9705.

The aspect of Malay economic structure that created crony relations has been the rising of quasi- state corporations and these corporations’ pushes politicians to get involved in the business life. 1 In 2002 the AK party rose to power in Turkey, and after then Recep Tayyip Erdogan naturally sought a solution to be able to in rule with his prominent political party. In a short span of time, the party expanded their adherents and became permanent in Turkish political life. In the meantime, they had to deal with several issues like the traditional dominance of the military, laicist block, White Turks, and rooted bureaucracy.

The AK Party was a government in a historical bloc of which the party is not a part of at the first stages of its rule. The military has always been a policy-shaper and ad been decisive on economy, bureaucrats, and businessmen until the AK Party’s putting an end to military’s effect on Turkish politics. This was one of the main reasons for that AK Party’s insisting on accessing European Union membership. They embraced the idea that closer relations between Turkey and the Union would mean less pressure from military. Entrance to European Union or negotiation with it is a chance to make military withdrawn from the immediate social matters.

During their first years, the AK Party’s opinion leaders improved moderate Islam’ identity and applied it into Turkish politics nd agenda. According to this identity, Turkey will implement Western- oriented foreign and domestic policies, sustain laicism, and be a conservative- democratic country which will not consist of terrorism or radical extremists. Therefore, Turkey tried to fit in criteria that are asked by the European Union. With the ascendance of the AK Party, Turkish political focal point shifted from conservative statist-authoritarian regime to a conservative-democratic political/social movement. 2 Establishing New Historical Bloc In Turkey while big-size bourgeoisie had constituted the economic Side of the egemony, small and medium size entrepreneurs had constituted the periphery of this historical bloc before the AK Party. understanding small-size entrepreneurs’ effects and role on the Turkish economic and political life requires an analysis of the Independent Industrialists and Businessmen’s Association (M??siAD) which gave full support to the AK Party since national elections in 2002, in order to create what is called ‘green money’ or green capital’.

To illustrate how M??SiAD and the AK party members are linked in the core, it would be useful to name some prominent faces from the AK Party hat have close relations with the M??SiAD. For instance, Abdullah G??l, the former Prime Minister, the former Minister of foreign Affairs, and the former President of the Republic of Turkey, was a member of the M??SiAD like Erdogan, and Ali Babacan who was the Minister Of Foreign Affairs and was the Deputy Minister responsible for economy. Some of the M??SiAD members have become members of parliaments, including Ali Bayramoglu, one of the founders of the M??SiAD. 3 Since AK Party’s first term, M??SiAD’s engagement to politics increased gradually and in 2009 election lots of members were isted as MP candidates from the AK party. ” It is possible to see the AK party and the M??SiAD as twin organizations that defend pious groups that are modernized and on ascent with the globalization. “14 The ascendance of M??SiAD which represents the new middle class stems from the decreasing power of the old middle class due to the economic policy changes in 1980s.

According to Ahmet insel this new middle class was “culturally conservative, politically nationalist and moderately authoritarian, economically liberal, and on the side of free enterprise.. .’i15 If we try to put dominate Islamic groups in Turkey into a category, ‘Liberal Islamists’ (before 2010) would be the best option among other two categories which are reformist fundamentalists and militant fundamentalists. Islamic liberalists’ surviving method can be considered co-existing, contrary to a monolithis hegemony.

Co-existence can be defined as “beCing] quite compatible with the norms of power sharing and the democratic bargain”. 1 6 But after 2010, a ‘new historical bloc’ started to appear. Like in the cases of Iran, small and medium size entrepreneurs become economic part of new historical bloc. 1 7 M??SiAD, before the post- odern coup d’??tat in 1 997, had been in search of an ally for empowering itself. This empowerment was sought from political parties, however, as major parties already are allies with other biggest and rooted associations, MlJSiAD had to become an ally with ???zal.

After ???zal’s death, MUSIAD collaborated with a political party (Welfare Party) with pro-lslamic regulations, which might be regarded as a predecessor of the AK Party in certain ways. Post-modern coup opened investigations to pro-lslamist journals, parties, businessmen, and firms to ‘secure’ laicism in the country. Because of the Welfare Party’s jeopardous position, MUSiAD tried to isolate itself from politics for a while. Relative liberalization and democratization steps under the AK Party made M??SiAD reappear in Turkish politics and economic agenda.

By the help of this appearance, first, Democratic Turkey Party asked a favor from M??SiAD about Kurdish issue, and second, T??SiAD (Association of Turkish Industrialists’ and Businessmen’s) invited to meet with M??SiAD for the first time in its history. These two examples illustrate how MUSIAD has become a dominant factor in Turkey. M??siAD has taken its power not only rom its political linkages but also from a solidarity terms mainly of religion. Therefore, M??SiAD’s choice on political ally was on the side of the parties with Islamist tendencies.

The so-called green capital in Turkey was attractive to political parties especially after the 20005. In this respect, the AK Party had a chance to direct Turkish economy around the green capital owners and around their growth successes in some fields. After then green capital owners had chance to reveal themselves. In this mutual gain relation, party has won votes; and cronies have gained more profit. “Although there was a transition f Islamic bourgeoisie toward politics during Welfare Party term, the bourgeoisie showed its face with the emergence of the AK Party which is a political tool of Islamic bourgeoisie. 18 Islamism’s success is originated from the capability of obtaining support of low-classes. The reason why Islamists lost their war to get power in state is due to their failure on sustaining their hegemony on low-classes in Egypt. 1 9 Crony relations within Islamists bloc is vital to maintain hegemony over low-classes, because by this way, SMEs can have an essential advantage over big-size corporations and want to continue tatus quo’s existence.

Despite ???zal’s attempts to create a middle class depending on his political party like M??SiAD, after his passing away, the government’s limited power averted to create a new crony because of the military tutelage. For instance, Turkey started privatization in 1984 but made state companies private in large-scale in 2000s. It is because of the taboo of the public on policy of state control introduced when Turkey was founded as well as the fact that Turkey has never been willing to leave the economy in the hands of the neo-liberal politicians and technocrats at least until the 2000’s” . Under the turbulent political atmosphere in the later 1980s, ???zal could Only implement ‘roll-back’ neoliberalism. But under the European Union accession negotiations, the AK Party has abated the influence of military and built a powerful executive branch? by implementing ‘roll-out’ neoliberalism. Therefore, Erdogan’s government easily allied with capital owners having ties with Islamic tradition or ideology.

As main part of roll-out neoliberalism, the AK Party and Privatization Administration have weaken old big-size firms that were nourished by the help of import-substituting development regime. 1 However, now SMEs are allies of the government which is regarded as an adherent of neoliberal economic policy. Nevertheless, although pro- neoliberal economic policy rhetoric emphasized the importance of ‘austerity financing, public seNice reform, and aggressive forms of state downsizing, neoliberals are skillful in terms of using ‘state power’ to implement and maintain these aims. 2 During Ozal era, government could have started (not big-scale) privatization policies in order to realize “active destruction or discreditation of Keynesian-welfarist… institutions. ’23 The fact that roll-out eoliberalism is defined as ‘the purposeful construction and consolidation of neoliberalized state forms, modes of governance, and regulatory relations”24 by Peck and Tickell would refer “socially interventionist policies and public- private initiatives that are paternalistic and punitive. 25 In roll-out neoliberalism “neoliberalism is increasingly associated with the political foregrounding of new modes of ‘social’ and penal policy-making concerned specifically with the aggressive reregulation, disciplining, and containment of those marginalized or dispossessed by the neoliberalization of the 980s26. “27 Transition to roll-out from roll-back neoliberalism is not only originated from failure Of the top-down structural adjustment program, but also from the globalization process28 and existence of new historical bloc.

The scope of this paper encapsulates new historical bloc perspective to be able to analyze crony capitalism and hegemonic situation in domestic politics. The key element of why ???zal could implement roll-back neoliberalism (or restrained to implement it) while Erdogan can implement roll-out neoliberalism is originated from the historical bloc that Erdogan re-built and riginated from the hegemony that Erdogan constituted and has sustained.

Ozal came to power just after a military coup, therefore government was feeling the pressure from military in every branch of political life and it was the main factor that is the behind of that Ozal could not build a historical bloc that includes the government in its core. Contrary, military, Kemalists and laic bourgeoisie were at the center of old historical bloc. However, Erdogan within ten years from 2002 enhanced its hegemony and create a new harmony in the basis of pro-government institutions, pro-government material power, nd pro-government ideas.

Crony capitalism is a mode of capitalist system in which government can use its power of allocation of ‘interests and opportunities’ to increase and sustain its hegemonic power and therefore the historical bloc, at the same time it boosts economy although there is a possibility of existence Of an economic growth that is unsustainable does not have a healthy base. Additionally, via choosing SMEs as the economic core of the hegemony, Erdogan has succeed broading its vote power.

Like in the case of Indonesia, crony capitalism has the potential of increasing economic rowth to a certain extent in Turkey. As we see in the case of M??SiAD, SME employers are in a network that provides them transparency and trust. This network fastened the capital accumulation across Anatolian cities. 29 The trust that provided under the umbrella of M??SiAD has actually an Islamic base that can be read as both entrepreneurial and moral. 30 Islamic values constituted the most important pillar of the AK Party hegemony in terms of influencing wide range of population and employers.

Religion is one of the best tool to mobilize entrepreneurs to take an action toward a common goal. We witnessed the role of religion in Iran as in the context of that Ayatollah Khomeini constructed its hegemony against the Shah by using religion to attract conservative SMEs’ entrepreneurs and their networks that had objections to Western-oriented secularist ideas. 31 Hegemony can be defined around the challenge ‘to build a union over a group’ and ‘to build a coercive structure over other groups’ according to Gramsci.

Constituting hegemony is provided in the context of building a balance between coercive and consent mechanisms. Therefore, if a group wants to a monopolized hegemony over hole society needs to realize a coherent governance between political society and civil society. Building an inter-classes alliance that is based on both economy and intellectual sub-structure32, which was not a structure that ???zal could make of. Building a hegemony requires melting all institutions Of civil society in a pot, and Gramsci sees this process as a pre-condition to construct a new hegemonic bloc.

However, a political decision making process which is under pressure from military, laics, and big bourgeoisie, even building a consent-coerce mechanism is difficult to be realized by a overnment during the 1 980s and 1990s. On the other hand, Erdogan governments could realize this difficult process by allying emerging economic actors which are conservative, Islamists and ready to gain profit at the expense of vitiating moral values. In this respect, the construction sector fastened with a rivet the economic side of hegemony and historical bloc, and therefore the crony capitalism.

After an initiation to regenerate the Gezi Park, demonstrators and governments’ coercive tools encountered explicitly for the first time of the history of the new historical bloc. Spaces can be regarded as ne of the main actor for reaching highest level of capital and the construction sector, due to its space-based nature, is a gravitational field for entrepreneurs. Therefore, to be able to reach the space in which entrepreneurs would build constructions in a limited land within a nation- state, creating strong ties with policy-makers indispensable.

The relation is based on gain-gain in this historical bloc, because on one hand SMEs gain profit from personal relations, and on the other hand politicians of governments sustain their hegemony over population and run an economy- policy in order to enhance their vote power. Both demonstrations and uses of coercive methods signed to the fact that the AK Party hegemony reached its climax and after then it will be in an irreversible decline according to Gramsci’s grasping on hegemony.

Because, the AK Party could not implement its consent tools efficiently to eliminate opposition movements in the case of Gezi. However, the reason that we cannot see directly a decline in the hegemony of the AK Party after Gezi incident and especially December 17th corruption probe is seen by, again, using Gramsci’s understanding of hegemony. Crony Capitalism’s Economic Consequences The Suharto case shows that crony capitalism has both positive and negative effects on a national economy and as the examples have also shown, the distinction between those stems from the period difference in Indonesia.

In the short run, Asian values, traditions, family ties, and crony relations have fostered economic growth during Suharto’s powerful reign in the late 1 980s and the early 1990s; but in the long term, economy was overturn in the 1997 Asian crisis. During the 1990s, Indonesia’s GDP growth rates were around just before the crisis it fell under 8% and in 1997 it dropped to 4. 7%. 3 Some pundits assert that crony capitalism might have positive repercussions due to the fact that crony capitalism provides with transparency among business and, a healthy hierarchy.

In the Suharto case, crony capitalism was spilled over all across the country. Suharto and his family benefited the rent from every single enterprise. 34 Yet in the Turkish case, cronyism has been limited to some conservative firms and is not common nation-wide. For the Turkish case I will use Potemkin village as a metaphor illustrating the countrys economic situation related to the discussions of crony capitalism. Potemkin village is used to describe cases that are unsustainable and, disguised, yet at the same time seem to be better than they actually are.

After the 2000s, Turkey deemed suitable for the construction sector as commanding height which was a wrong choice for some prominent economists like Refet G??rkaynak and Sevket Pamuk. The construction sector was accepted to be a new way of getting richer, so it constituted gravitational field for both capital owners and political parties (especially for the ruling AK Party). To >evket Pamuk, in AK Partys ruling terms government’s intervention power have ncreased.

Because of this aspect of Turkish economy, firms found out a method to develop which was strengthening ties with the ruling party instead of investing in technology, education, individual, or R&D. And in such an economy, entrepreneurs can easily progress in the construction sector. According to G??rkaynak, Turkey’s policy makers decided to increase demand rather than the production capability. One Of the economic expansionist policies was on the basis of both state and private-led construction sector. To exploit rent incomes, investments slide to ‘construction and real estate’ from he R&D and industrial production.

In this approach, the government stimulated private sector to direct these fields. So, the government created its own cronies on the foundation of construction and created capital owners depending on governmental policies. 35 Therefore, Potemkin village metaphor might be applied to the Turkish case in terms of economic growth which does not have a healthy basis. The citizens, together with ideology or religious view of parties, take the economic situation into account during the times of election. The construction sector, is attractive for the ruling party to ndicating how SUccessfUl the Turkish economy is operating.

Again, we can see that there is a mutual relationship between cronies and the party. While the AK Party increases its votes stemming from economic growth despite of its Potemkin nature, some cronies increase their profit from investing on the construction sector. In an interview, Dani Rodrik’s suggestions for the Turkish economy to create sustainable grow’th show the inadequate private saving and renting problems of Turkey. For developing countries, state intervention is inescapable but after achieving a threshold such- centralist politics would e unsuccessful.

To overcome this problem, the state should give place to non-centralised state. By the way, the state should establish a relationship with the private sector but state policies must be equal toward different firms. 36 Conclusion In a historical perspective, entrepreneurs that are depended on state and therefore caused crony capitalism with the policy-makers emerge mainly on the countries that did not experience modernization process properly. External effects (intervention, war) and internal effects (militarist modernization) can cause unhealthy development models adopted by the states.

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