EconoMonitor

The Kapali Carsi

Turkey’s (Erdogan’s) Ak Palace and the new Reich Chancellery

Hello Again after another absence from blogging. I return thanks to my beloved Hurriyet Daily News (HDN), as I explain below. But I will try to stick to blogging regularly this time around.

Below is what was supposed to my HDN column for today. However, when you buy the paper today or when you go to the HDN website, you’ll see another column of mine with an equally enthralling title: I see debt people. As an American philosopher (and ping pong player and football star and Việt Nam veteran and entrepreneur and investor and inventor and many many things more) once said, that’s all I have to say about thaaat:)

As for the column itself, just a couple of additional points. First, some extra reading: If you would like to read more about Supreme Leader Recep Tayyip Erdogan’s palace, here are some pieces from Bloomberg, Time, Financial Times and Independent. And my own paper had some interesting commentary as well: A couple from Mehmet Y. Yilmaz, for example. And if you would like a different point of view, here is Akif Beki, who was Erdogan’s press adviser for a while when he was Crime Minister. Somehow reminded me of the AKP Deputy who was claiming that Erdogan, like everyone else, had the freedom to sin and we just could not interfere with that!:) And it was published in HDN! I am not complaining; just pointing out that HDN values all views. Do you think my post below would have been published in Daily Sabah, the English version of pro-government (that is actually an understatement, “Erdogan’s” would be better) Sabah that was launched early in the year to fight the truths/facst published in HDN and Gulenist Today’s Zaman? Hell, it wasn’t even published in my own newspaper. Makes me feel like I am fighting Tigers with an American tank, to pay homage to Fury, one of the best movies I saw of late. But I am not whining: As a Besiktas fan, I just love being the underdog…

Anyway, I should not digress too much: I have two column recommendations if you speak Turkish: At Wall Street Journal Turkey, economist Emrah Aydinonat explains the concept of opportunity costs in economics by giving some examples of what could be done with the cost of the Ak Palace. And at Radikal, Cenk Sidar compares Ak Palace to some other presidential palaces across the world, along with some basic macro and development indicators from the respective countries and argues forcefully that it takes more than a huge palace to become a world leader, or even a developed country…

Last but not the least, you may be wondering why I was using the word “at least” when mentioning the present values of the Brunei Sultan’s palace and the new Reich Chancellery. That’s because there is more than one way to measure them. The site I used for the calculations, Measuring Worth, summarizes the different measures, explaining which could be useful when. BTW, for both calculations, I had to convert the local currencies to dollars using the exchange rates in the respective years. This is not the ideal solution, but in the absence of suitable time series data for Germany and Brunei that could replicate the methodology in Measuring Worth, that was a second best. Besides, it was easier- I am sure I could find CPI and GDP deflator series, if not wages, for Brunei and Germany going back to 1984 and 1938. One final data point: The German Statistics web site I linked to in the column had the GDP excluding Berlin and Saarland. I understood why they did that, but that is like excluding Istanbul from Turkish GDP. Luckily, I found a couple of sources that were listing German military spending as 17 billion reichsmark, or 10 percent of GDP, in 1938. Voila!

Anyway, on to the column:

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Finance Minister Mehmet “Nominal” Şimşek defined Turkey’s agenda this week by revealing on Nov. 4 that President Prime Minister Recep Tayyip Erdoğan’s new presidential palace had cost TL1.37 billion, or $616 million.

The palace was already a topic of debate. Some noted that the name was referring to the ruling Justice and Development Party (AKP), or Ak Party in short. Ak, which means “white” in Turkish, symbolizes the party’s intolerance for corruption. The President is supposed to be impartial and equidistant to all political parties.

Others answered to this wordplay with one of their own, referring to the palace as “kaç-ak”, which means unlicensed in Turkish. When an Ankara court ruled that the construction of the palace was illegal back in March, Erdoğan accused them of being Gülenists and dared them to come and tear it down.

The size of the palace was discussed a lot as well. While the Brunei Sultan’s palace, Spain’s Royal Palace and Italy’s Quirinal Palace have more rooms, none comes near its floor area of almost 300,000 square meters. I guess the Sultan’s palace has been dethroned from the Guinness Book of Records as the largest residential palace.

The cost of the palace dominated the busy economic calendar this week, which included the release of October inflation on Nov. 3, a conference of credit rating agency Moody’s on the Turkish economy on Nov. 5 and the announcement of the first group of action plans of the government’s structural reform agenda on Nov. 6.

It wasn’t long before people started calculating what could be bought with TL 1.37 billion. Economics is about the allocation of scarce resources for unlimited needs, and so such calculations are not lame at all. However, I am more interested in the cost of Ak Palace in comparison to other colossal palaces.

Most other palaces were built centuries ago, making such a comparison very difficult. The only major palace built recently is that of the Sultan of Brunei, which cost $442 million in 1984- worth at least $852 million today. But you have to remember that Brunei is not a large country. Its GDP was $3.8 billion in 1984, and so the sultan’s palace cost a whopping 11 percent of GDP.

Brunei is not an advanced democracy, or even a democracy. It is a sultanate. We need to compare Ak Palace to a similar building constructed in a democracy like Turkey. I know of one: 5 years after he came to power in 1933 after democratic elections, Adolf Hitler gave his favorite architect Albert Speer a blank check to build a new Reich Chancellery, “with grand halls and salons that would make an impression on people.”

Speer completed the project in a year. The cost of 90 million reichsmark would be equal to at least $476 million today– and as high as several billion. German GDP was 172 billion reichsmark in 1938, and so the chancellery cost 0.05 percent of GDP. Using the Turkish government’s 2014 GDP forecast of TL1,764 billion puts the Ak Palace bill at 0.08 percent.

The two advanced democracies spent a similar share, less than 0.1 percent, of their GDP for the palaces of their leaders. If Erdoğan were a sultan, as enemies of the state claim, he would have spent 11 percent of Turkish GDP, or TL194 billion, on his palace(s)!

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