Tinkering with Turkey

If the economic train wreck in Argentina looks gruesome, it's worth asking why the U.S. is cheering one of its most vital allies, Turkey, right down the same track. Turkey's Prime Minister Bulent Ecevit went to the U.S. this week seeking more trade and aid for his nation's shaky economy. He came away with little of the former, thanks to U.S. protectionists. But Mr. Ecevit got an official nod of approval for more IMF cash, since Mr. Bush has made clear he's willing to do whatever it takes to keep Turkey's economy afloat. That's the opposite of what a sensible U.S. policy would look like.

Check out the IMF trajectory in Turkey. The current program is by some counts the 20th in a series dating back to 1958. The current "rescue" began as a $4 billion program in 1999, intended to break with the past by bringing down inflation, then running at an annual 65 percent. At IMF urging, Turkey adopted a "crawling peg" -- in effect a system of planned devaluations.

The program produced a December 2000 banking crisis. The IMF then added $7.5 billion. By early 2001, Turkey has a lira crisis, and it switched to the IMF patent medicine of a floating exchange rate. The lira crashed. More than one million Turks have since lost their jobs.

Last May, the IMF tossed in another $8 billion, and still more advice. By last autumn Turkey had yet another crisis -- for which the IMF has now promised $12 billion. Meanwhile, with some $15 billion of the growing IMF pot already disbursed, Turkey's economy shrank last year by 8.5 percent; inflation over the same period was right up there at the old 1999 rate of 65 percent.

The latest IMF advice for Mr. Ecevit is a tax "reform" intended to "broaden the tax base." That's Fund-speak for a tax increase, something Turkey already tried with value-added taxes on most goods and services last June. Mr. Bush has hooted down the mere thought of any tax increase amid recession for America. But when the IMF gives the same advice to other countries, the U.S. has no objection.

The U.S. and Europe can best help Turkey by opening their borders wide to Turkish goods and perhaps easing its $5 billion military debt burden. Turkey is too important to entrust to the IMF, and the world can't afford another Argentina.

-- The Asian Wall Street Journal, Hong Kong