The political consequences of dependent financialization: Capital flows, crisis and the authoritarian turn in Turkey

Recent debates on financialization in emerging market economies highlight the terms of unequal exchange that they are embedded in, where international capital flows steered by powerful financial actors and transnationalized banks have a major impact on economic growth performance. As a result, many of the small open economies in the Global South have become increasingly sensitive to international market volatilities, as the post-2008 Global Financial Crisis (GFC) episode has shown. Yet, we know much less about the political implications of these interactions. How do unequal financial relations influence political trajectories in emerging market economies? Using process tracing and based on original evidence from Turkey, we find that when GDP growth is dependent on financial inflows under a credit-led growth model, the constraints on the domestic policy space following an economic crisis allowed the ruling party to instrumentalize monetary and regulatory institutions as financial agents of political repression.