The Changing Face of Turkey: Economy

May 11, 2012 6:07 pm0 commentsViews: 36

In the first part of two-part series on the changing face of Turkey, Emre Kazim looks at changes in Turkey’s economy over the last 20 years, and the move towards neo-liberalism. For the second part of this series, dealing with political changes, click here.

The continued wave of arrests and trials of members of the Turkish military demonstrates the extent to which Turkey has been evolving since the coming to power of the AKP in 2003. The significance of members of the military coming under pressure and being held to account cannot be understated; it was once said that nations have an army but that the Turkish army has a nation. Since the republican revolution of Ataturk, Kemalism (as a state ideology) has held the axiomatic belief that it is the ‘guardian’ over the people. Coup d’etats have taken place consistently throughout the last 60 years, beginning with the hanging of Adnan Menderes – a democratically elected president with huge popular support – to the 1980 coup d’etat lead by General Evren, to the 97’ ‘post modern’ coup which removed the coalition government lead by Necmiten Erbakan. Within this back drop, it comes as no surprise that the Generals announced upon the 97’ event, ‘if need be, this will last 1000 years’ … after not quite a 1000 years the days of such imminent military intervention into civilian affairs appears to be over.

Ozal and Neo-Liberalism

However, the question remains, how has this seeming miracle arisen? There are a number of factors which may shed light on this phenomenon, which requires recourse to the transformations of power and economy which took place over three decades ago. The period of Turgut Ozal (1983-1993) as chief economic bureaucrat, then Prime Minister and then finally as President, saw the beginnings of what is now the maturation of a neoliberal economy in Turkey. Prior to this epoch the Turkish State’s (viz Military) hegemony manifested itself in economic state-centrism, which was compounded by subsidies of state enterprises. Ozal, who had worked for the World Bank in the early 70’s, initiated radical economic change to move from a state orientated, to a free market economy. In order to achieve this Ozal decreased public expenditure, sought to devalue the Lira (in order to shift from an import to an export-led economy) and removed government subsidies. His famous governance dictum on three freedoms; freedom of conscience, speech, and commerce, is a milestone in the social history of modern Turkey. Essentially Ozal was attempting to create an enterprising class and promote the opening of businesses by deregulating and encouraging the free market. Although these may have been lacking somewhat in actual practice, they still provided an opening for the marginalised segments of civil society, both symbolically (by a change in the rhetoric) and practically (by economic restructuring and privatisation). The religiously conservative merchant class sought major benefits from this epoch by starting their own business in this new ‘space’, leading some to see it as the real starting point of the Islamic ‘emergence’ in Turkey. It is difficult to theoretically explain this religious merchant class. Some have modelled it upon Weber’s Protestant Ethic theory, by relating Islam to the business activities of Muslims i.e. an ‘Islamic Work Ethic’. Whereas others simply dismiss the phenomena as a manifestation of profit motive linked to status class importance in Turkish culture. Ozal’s sudden death (1992) is now openly spoken about as ‘mysterious’, with Abdullah Gul, the current President, calling for an investigation in to the circumstances of Ozal’s death

The Dark 90’s, The Dawn of the AKP

Nonetheless, despite these structural changes to the Turkish economy, the 1990’s were grim. Ozal’s death was followed by a halting of his programs and, following Prime Misters Ciller’s disputes with the Turkish central bank (1993 – 1996), confidence in the government was shaken. Worries over economic policy led to a ‘dollarization’ of the economy, with domestic assets being switched to foreign-currency reserves – such capital flight led to a collapsing of the Lira. Known as the ‘economic lost years’, the political front, culminating in the 97′ coup, was no less dark. The Twin Economic Crisis (as it became known) of 2001/2002, was rightly considered the most devastating event to the Turkish economy since the inception of the republic. Within this context of disillusionment all the previously represented parties in the Turkish National Assembly were shunted and the in 2002 the AKP swept into power.

In just under a decade the economy has been transformed making Turkey a regional powerhouse as well as a global player (with some predicting that it will be the second largest economy in Europe by the 2020s). GDP has increased from 231 Billion USD (2002) to 772 Billion USD (2011) and GDP per capita soared from 3,500 USD to 10,444 USD in the same period. A continuation of Ozal’s ‘neoliberal experiment’ has become one of the pillars upon which the AKP has performed its ‘miracle’. A radical acceleration of Ozal’s policies was undertaken, with block sales of state owned assets being the dominant mode of transfer from state to private ownership – in particular, there has been a striking preference for block sales of leading public enterprises to major private sector consortia, rather than through capital market privatisation. According to economist Ziya Onis, the result of this choice of method is observed when considering the income distributional implications; by block sales maximisation of revenue and rapid results have occurred at the price of including wider segments of the population through capital markets. This also raises important question about the welfare consequences of privatisation, ‘especially in the presence of significant market power’ – it is questionable as to how much of this ‘trickling down’ has occurred and where investment of the state directed (a West-East lop-sidedness of infrastructure illustrates this). This becomes a case in point when one considers unemployment rates – currently around 14% – which have fluctuated under the AKP around the 10% mark; inflated figures from this privatisation decade obscured this troubling phenomenon; Adana and Diyarbakir (two of the major cities in Turkey) have unemployment rates that are rising at 26.5% and 20.6% (2009) respectively. Of course it is not only privatisation that is at play; Foreign Direct Investment has been a major factor, with Turkey being seen as a ‘safe haven’ in this global economic crisis. In fact the deputy prime minister, Ali Babacan, has just announced a new tax amnesty on portfolio investments, which means that no tax will be collected from substantial investment transactions – a further encouragement for foreign investment.

Economic Initiatives

However some feel little cause for celebration. Leftist elements (for example the Peace and Democratic Party) as well as more conservative segments of society (represented by the ‘Felicity Party’) remain cynical, with the sense that Turkey is ‘selling itself to the outside world’. Many are calling for an alternative paradigm, preferring Turkey to taking a more protectionist approach and becoming self-sufficient, by drawing inspiration from the likes of Brazil. Others consider a nefarious undertone to the conspiracy, arguing that due to Turkeys geographical position and influence in the region, the US will always provide legal and political bribes to keep Turkey controlled and dependent.

Emre Kazim

  • The Changing Face of Turkey: Politics | Comment Middle East

    [...] In the second part of a two-part series on the changing face of Turkey, Emre Kazim looks at changes in Turkey’s politics over the last 20 years, and the accompanying successes, and problems. For the first part of this series, looking at the economy, click here. [...]