There is a deep, organic, and strategic nexus between polarisation and high inflation. Inflation is conventionally explained through monetary conditions, fiscal policy, exchange-rate movements and supply shocks. Yet these forces do not operate in a political vacuum. Once inflation becomes entrenched, its persistence can depend partly on whether households trust institutions, believe stabilisation policies will endure and accept the distributional costs of adjustment. Political polarisation matters because it can weaken each of these mechanisms. By fragmenting economic expectations along partisan lines and eroding confidence in common institutions, polarisation may not create inflation in the first place, but it can make inflation considerably harder to defeat.
Türkiye offers a particularly useful case through which to examine this feedback loop. Prolonged inflation has coincided with intense political polarisation, creating conditions in which economic information, policy credibility and even expectations about future prices are increasingly filtered through political identity. The result is a problem that is simultaneously macroeconomic and institutional: stabilisation requires not only tighter policy, but sufficient confidence that households and firms will respond to it.
The Boycott Paradox: Partisan Bias in Economic Behaviour
It is no coincidence that polarised masses consistently display their reactivity in the wrong places and at the wrong times. The fact that people are unable to boycott cafés and restaurants with exorbitant prices yet exhibit a highly enthusiastic stance in boycotting establishments that do not allow animals inside due to hygiene conditions, for instance, is one of the proofs that rational evaluation has collapsed.
At the root of this paradox lies partisan bias, known in the academic literature as “asymmetric de-anchoring”. Individuals shape their economic expectations according to their own political affiliations. Research indicates that economic statements reflected in surveys are largely not rational beliefs, but rather “partisan cheerleading” (cheap talk) exhibited by participants to protect their own political camps.[1] The inability to demonstrate a robust stance against unfair profits and exorbitant prices, whilst ostensibly discharging this reaction through other high-level frames of reference, is the everyday manifestation of mathematical partisan bias in inflation expectations.
Parallel Realities and the Economic “War of Attrition”
When the media presents economic data as an ideological narrative rather than an objective information set, parallel realities are constructed for households. The manner in which the gap between official data and alternative inflation measurements is presented creates a rigid partisan news filter for the audience. This asymmetric news interpretation mechanism, wherein one half of society believes inflation is falling whilst the other half expects hyperinflation, fuels inflation inertia.[2]
This coordination failure initiates a “War of Attrition” in the economy.[3] In a polarised atmosphere, no one wishes to bear the cost of a stabilisation programme (tax increases or spending cuts); different socio-economic groups attempt to pass the bill to one another, waiting for “someone else to throw in the towel”. Delaying rational compromise in this manner renders fiscal indiscipline chronic, whilst also preventing consumers from engaging in rational spending behaviour. The belief that prices will continuously rise prompts the bringing forward of expenditures, and due to this premature spending, prices continue their upward trajectory. What is experienced is a self-fulfilling vicious circle.
The Rationality Trap: When Hedging Becomes Self-Fulfilling
Chronic inflation creates a rationality trap. When households expect money to lose purchasing power rapidly, bringing forward purchases, accumulating durable goods or shifting savings into foreign currency can make sense at the individual level. Yet, when millions of households behave similarly, individually rational acts can become collectively destabilising. Demand is brought forward, pressure on the currency intensifies and expectations of further inflation become embedded in pricing behaviour.
Polarisation can reinforce this coordination failure by weakening the credibility of the institutions expected to break the cycle. Households that distrust economic authorities are less likely to revise their expectations merely because official policy changes or inflation data improve. What appears from above as irrational consumption may therefore be rational hedging under conditions of low trust. The macroeconomic problem is that such defensive behaviour can help reproduce the conditions against which households are trying to protect themselves.
Türkiye’s divergence from international price trends illustrates the puzzle rather than resolving it. Food, housing and consumer goods have experienced exceptional price increases, although the causes vary considerably across sectors and include exchange-rate depreciation, taxation, supply constraints and other conventional factors. The relevant question for this analysis is therefore not whether polarisation can replace these explanations, but whether low trust and entrenched inflation expectations help explain why price pressures become so persistent.
Once households cease to believe that prices will stabilise, the normal disciplining effect of high prices can weaken. Consumers may accelerate purchases rather than postpone them, firms may price defensively against anticipated future costs, and workers may demand compensation for expected rather than past inflation. Polarisation matters insofar as it makes those expectations harder to re-anchor: improvements in official indicators or policy announcements are interpreted through competing political realities rather than a common informational baseline.
The Cost of Exclusion: Chronic Mistrust and Economic Anxiety
In this context, inflation is not merely a technical imbalance; it is also a socio-psychological crisis where chronic mistrust, brought about by an out-of-power status, upends society’s economic expectations.[4] In environments where political polarisation deepens, it becomes difficult for segments excluded from the administration to develop trust in implemented economic policies and official institutions.[5] In this phase, where social belonging and institutional trust are damaged, the prejudices created by political affiliations drag individuals into a predicament that forces them to effectively cut off the branch they are sitting on.
Groups that have lost faith in the future and in institutions act with a constant expectation of “catastrophe and collapse” rather than making long-term plans. This state of chronic anxiety triggers defence mechanisms that undermine the national economy, such as rushing to hoard foreign currency or gold under the mattress, fleeing the national currency in fear of an imminent currency shock, and accelerating non-essential expenditures.
Although individuals may view making purchases out of concern that the value of their money will completely evaporate in the future as a logical method of “hedging against inflation”, these panic purchases are one of the primary drivers that distort pricing behaviour and fuel exorbitant pricing practices. The transformation of this sense of mistrust, brought about by polarisation, into defence mechanisms within households is one of the greatest societal obstacles to combating inflation.
Political exclusion can deepen this dynamic by weakening confidence in the institutions responsible for stabilisation. Groups that expect deterioration rather than recovery have stronger incentives to protect themselves through foreign currency, gold, accelerated purchases or other forms of inflation hedging. Such behaviour may be individually understandable, but when widespread it can complicate attempts to re-anchor expectations.
The resulting problem is therefore less one of consumer irrationality than of collective mistrust. Households act defensively because they doubt that others—or the institutions governing the economy—will behave differently. Polarisation can turn that distrust into a coordination problem, making economic adjustment harder even after the underlying policy stance begins to change.
Conclusion: Rebuilding Trust in a Polarised Arena
At its economic core, polarisation is therefore also a crisis of trust: citizens become less willing to believe that institutions, firms or other social groups will bear their share of adjustment. The economic importance of social trust lies precisely here. Stabilisation depends partly on coordination: households must believe that inflation will fall, firms must believe that competitors will not continue raising prices indefinitely, and social groups must believe that the costs of adjustment will not be imposed exclusively upon them. Polarisation weakens each of these expectations by reducing confidence in institutions and turning economic policy itself into an object of partisan contestation.
This does not make social cohesion a substitute for monetary or fiscal discipline. Türkiye’s inflation cannot be solved through trust alone. But neither can durable price stability be reduced entirely to interest rates, budgets and exchange rates when households and firms no longer share confidence in the institutions administering them. The deeper challenge is therefore to restore both macroeconomic credibility and the social trust through which credible policy changes behaviour. Inflation may begin in economic imbalances; polarisation can help make it persist.
Endnotes
[1] Rholes, R., & Wabitsch, A. (2026). “When Talk Isn’t Cheap: Inflation Expectations Across the Political Cycle”, Working Paper; Binder, C. C., Kamdar, R., & Ryngaert, J. M. (2024). “Partisan Expectations and COVID-Era Inflation”, Journal of Monetary Economics, 148, Article 103649.
[2] Jeong, H., Jo, Y., & Shim, J. (2025). “When News Isn’t Just News: Partisan Affiliation and Inflation Expectations”, American Economic Association; Demiralp, S., Saka, O., & Weber, M. (2026). “Polarized Media and Inflation Expectations”, CEPR Discussion Papers, No. 21747.
[3] Alesina, A., & Drazen, A. (1991). “Why Are Stabilizations Delayed?”, American Economic Review, 81(5), 1170-1188.
[4] Binder, C. C., Kamdar, R., & Ryngaert, J. M. (2024). “Partisan Expectations and COVID-Era Inflation”, Journal of Monetary Economics, 148, Article 103649; DiGiuseppe, M., Garriga, A. C., & Kern, A. (2025). “Partisan Bias in Inflation Expectations”, MPRA Paper, No. 119854; Hirschman, A. O. (1987). “The Political Economy of Latin American Development: Seven Exercises in Retrospection”, Latin American Research Review, 22(3), 7-36.
[5] Binder, C., Couture, C., & Smit, A. (2025). “Partisan Trust in the Federal Reserve”, NBER Working Papers, No. 31254; Kuang, P., Weber, M., & Xie, S. (2025). “Central Bank Communication with the Polarized Public”, NBER Working Paper, No. 33071; Cukierman, A., Edwards, S., & Tabellini, G. (1992). “Seigniorage and Political Instability”, American Economic Review, 82(3), 537-555.
