Kemal Ataturk built Turkey's first railway in 1927. A new tunnel is being dug under the Bosporus.
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A generation of entrepreneurs has come of age under Erdogan, and they are helping to diversify the economy. "We are the sons of small-town shopkeepers who wore skullcaps, but we wear ties and have taken their businesses overseas," jokes Rizanur Meral, who heads TUSKON, an organization for small and medium-size businesses that is close to Erdogan. Meral and his energetic breed of clean-cut entrepreneurs — purveyors of everything from food and textiles to furniture and machinery parts — are behind the rise in trade with Africa and the Middle East. Trade with Africa went from $10 billion in 2005 to $21 billion in 2010, while trade with neighboring Iraq went from $940 million in 2003 to $12 billion last year, making it Turkey's second largest trading partner after Germany.
While those new markets have lowered Turkey's dependence on Europe — exports to the E.U. dropped from 60% to 34% in the past decade — it is still the country's largest trading partner, and the slowdown there is having an effect. As the E.U. contracts, the Turkish economy is starting to sink. "The government does not have a long-term economic strategy," says Sonmez.
That has raised questions over whether Turkey's government can weather the rough waters ahead. Officials recently cut their economic-growth forecast down to 3.2% for 2012. Banks have put the brakes on consumer-loan-driven spending by tightening eligibility requirements. As a result, construction, which grew by more than 11% last year, was up only 0.4% in the second quarter of this year.
There are political risks too. On the eastern border, the Syrian conflict threatens to spill over. The two countries have been trading cross-border fire after Syrian shelling killed several Turkish villagers early this month. In the southeast, where Kurdish separatists have stepped up fighting, more than half the people live in poverty. The urban building boom has yet to touch them, but in Istanbul, gloss prevails. One editor complained that even a small item about the rising price of tomatoes merited an angry call from a government official.
Filmmaker Imre Azem documented Istanbul's dizzying transformation for his acclaimed documentary Ekumenopolis. He worries that reckless growth will eventually end with a crash. City planners in the 1980s once imagined Istanbul "as a kind of Amsterdam — green, historically preserved, aesthetic," Azem explains. "Instead, what's happening here is savage. The model is based on pumping more people in the city, constantly developing more land. That's how the bubble grows."