At Istanbul's Grand Bazaar, empty shops echo Turkey's deepening strains

Merchants long accustomed to crowds of tourists say now they are not sure how they'll stay open. Political turmoil and growing numbers of attacks in urban centers have caused a sharp economic downturn.

Inside the tight warrens of Istanbul’s famous Grand Bazaar, an edge of desperation has crept into the voices of touts trying to sell their wares.

They are selling everything from gold jewelry, tourist trinkets, and spices to leather jackets and underwear, as traders have for centuries along these cramped, ancient flagstone alleyways.

But a number of shops are closed, with lights out or tarpaulins draped over their fronts. And owners say their hopes that 2017 would reverse a slowing economy and end attacks, which have damaged Turkey’s tourist-friendly reputation, have hardly materialized.

Instead, the mood has darkened: the new year was ushered in with another assault, claimed by the so-called Islamic State (IS), in which a lone gunman killed 39 New Year revelers, many of them foreigners, in one of Istanbul’s most exclusive nightclubs. He was captured by police on Monday night, but it was the 30^th major attack in Turkey in a year, carried out by IS or Kurdish militants.

Adding to Turkey’s woes, its currency, the lira, has lost a further 10 percent of its value, in a drop that analysts note coincides with high political tension. Last week, the ruling Justice and Development Party (AKP) began action in parliament to rewrite the constitution to realize President Recep Tayyip Erdoğan’s long-held dream of creating a near-invincible executive presidency.

The move comes just months after Mr. Erdoğan weathered a coup attempt – and a vote on key elements last Thursday broke down into mayhem amid accusations of “regime change,” fistfights, broken noses, and the hurling of potted plants. After initial passage, a second reading begins today that could lead to a national referendum as early as April.

Turkey is at a crossroads. Turks have watched the power balance shift toward Erdoğan, even as constraints on civil institutions have grown and attacks related to multiple wars have reached violently into urban centers. They are seeing foreign tourists increasingly shun one of the world’s iconic cities out of fear of terrorism. And here in this historic attraction, the despair is palpable, underscoring that even though Erdoğan has a majority of voters behind him, there is a high cost to the current trajectory. 

The Grand Bazaar is a key bellwether of Turkey’s economy and politics, and on this day, its prognosis is worrying: The men rushing endless cups of hot tea to merchants trying to ward off the cold seem to be doing the only roaring business.

“It’s really hard, people are trying to stand on their own two feet. But the future – no one knows what will happen,” says a trader whose family owns four shops selling ornate ceramic plates, tiles, and bowls. He has cut staff from 100 to 20 since mid-2015.

As he talks to this reporter, two Chinese customers step inside his shop and buy a pair of bowls. “Ni hao?” – “how are you?” – he asks in Mandarin. He has never seen so few visitors in his 25 years at the Grand Bazaar.

“For a country you need big hope for the future to make investments,” says the merchant, who asked not to be named. “But now we do as little as possible, waiting to see what will happen. Our [fellow shop owners] have a lot of debt and are trying to pay it. Today nothing is coming in, everything is going out. Everything is going in reverse.”

The shrinkage at the Grand Bazaar is unparalleled in recent decades. Officials reported last October that 600 of 3,600 shops had been closed, with a total of 1,500 predicted to close by the end of 2016. That figure could not be verified.

The downturn is also the worst since the AKP was first elected in 2002. It initially stabilized the currency and the economy with pro-business measures, and led more than a decade of robust economic growth that made Turkey a powerhouse envied throughout the region. 

But in 2013, that bright economic example was tarnished during a month of protests in Istanbul’s Gezi Park against what opponents called Erdoğan’s “authoritarian” leadership. Since July 2015, the state has again been at war with Kurdish militants in the southeast; it has launched ongoing, cross-border operations into Syria and Iraq; and it has weathered an ever-increasing number of attacks on Turkish soil.

A coup attempt last July prompted a state of emergency, which has been extended twice. Some 140,000 citizens have been arrested, and Erdoğan has accelerated the building of an executive presidency. The Turkish economy shrank by 1.8 percent in the third quarter of last year – its first contraction in seven years. 

“I am rich because of Erdoğan, but I will get poor because of Erdoğan. [He] is not doing good things anymore,” says a Grand Bazaar scarf and rug seller whose family runs seven shops here, and who asked not to be named. 

At Turkey’s peak, his scarf shop alone used to bring in the equivalent of $4,500 to $10,600 each day, he says. Today he is lucky to make $100 in a day.

“It was just amazing. I would turn the dial, and go to America, I would go anywhere,” he says. “Not anymore. Nowhere. People are too scared to do anything, to open a shop. They keep money like this,” he says, clutching his fist tightly. He is considering moving to the US. 

This merchant blames the downturn on what he calls a divisive push for one-man rule, and on insecurity caused by 2.7 million registered refugees from Syria. Some of them, he says, turn out to be militants.

“I don’t know what kind of people those are… [Erdoğan] took all the people, not knowing if they were good or bad,” says the scarf dealer. “People who read the Quran, Erdoğan never thinks they can do bad. But now they are more dangerous than the others.”

Turkey’s overall economic difficulties are mirrored in its currency: The Central Bank has tried to support the lira, which for years traded at 1.13 per dollar, but today has weakened to 3.78 per dollar. Erdoğan has called on Turks to show their patriotism by exchanging their foreign currency for lira, and called on banks to help “foil the plot.”

“There is no difference between a terrorist who has a weapon or a bomb in his hand and a terrorist who has dollars, Euros and interest, in terms of aim,” Erdoğan said on Jan. 12. “The aim is to bring Turkey to its knees, to take over Turkey and to distance Turkey from its goals. They are using foreign exchange as a weapon.”

Yet business leaders warned on the same day that strengthening democratic institutions and renewed political stability was necessary to stop the decline – a clear poke at AKP plans to radically alter Turkey’s parliamentary democracy.

Turkey can’t prevent being engulfed by “pains of the Middle East” without relying on its historic secularism, and “cannot overcome escalating security concerns by constantly extending the state of emergency,” said Cansen Başaran-Symes, the outgoing president of the Turkish Industry and Business Association.

“Turkey can only secure its future welfare by renewing its institutions, enhancing the rule of law, showing respect to human rights and property ownership rights, and adopting smart … policies,” she said. 

Opposition politicians are particularly worried about the constitutional changes that will erase the post of prime minister, enable dismissal of parliament by the president, and boost the president’s ability to rule by decree.

“The authority you permit today will bring about the end of this country,” said Özgür  Özel, a leading member of parliament from the main opposition Republican People’s Party, after the Jan. 12 brawl. “You [lawmakers] are trying to destroy yourself [parliament] without anyone seeing. We will not allow this.”

Top AKP officials counter that an executive presidency will end political uncertainty, and therefore boost the economy.

“This is where some optimism is warranted,” said Mr. Şimşek, a former economist at Merrill Lynch. His sense is that “most likely the worst is behind us regarding geopolitical tensions.”

That is not what it feels like in the Grand Bazaar, where hopes of change have yet to bear fruit. Tourism numbers are at record lows, and no one predicts an end to terrorist attacks.

“The world is like a small village,” says the ceramic trader. “When you live here, you see and you feel secure. But if you see it on TV from outside, you see violence and nobody comes.”

“People outside see Turkey as less democratic, a one-man show,” adds the trader, who says he will vote “no” in any referendum. “This is not the priority now. We have a lot of problems, and insecurity, but it is necessary? Not now… When you have a lot of power, you lose yourself.”