THE VICTORY of Recep Tayyip Erdogan, Turkey’s president, in a referendum on April 16th is seen by many observers as a worrying step on the road to autocracy. The vote handed Mr Erdogan far-reaching new powers. But the Turkish lira, government bonds and stockmarket all gained ground as the results came in.
It was a reminder that the relationship between markets and democracy is not rock-solid. Like an errant husband, investors may proclaim their fidelity to democracy but are not averse to seeing someone else on the side.
In Turkey, investors may have feared turmoil if Mr Erdogan’s proposal had been defeated. It is an old, but fairly reliable, cliché that investors dislike uncertainty. And the early years of Mr Erdogan’s rule saw rapid economic growth; since he took office, the Istanbul market has gained 760% (see chart).
An authoritarian government can provide certainty, at least in the short term. When Mussolini took power in Italy in…
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