Turkey, a strategically important country, a member of NATO, and currently an applicant to join the EEC, has an interesting economy which provides a good example of a developing country struggling to improve its economic performance by means of Five Year Plans, export growth strategies, anti-inflation policies and monetary and fiscal policies, with modest success. This book presents a detailed analysis of the Turkish economy and its current difficulties and argues that Turkey is in fact a country with considerable economic potential which is at present much underutilised. By analysing the problems and by assessing recent policies designed to cope with them the author suggests how economic strategies and thereby economic performance might be improved. Z.Y. Hershlag is Professor of Economics of Development and Former Director of the David Horowitz Research Institute for the Developing Countries at Tel-Aviv University.
Contents
Tables and Figures / iv Preface / v Acknowledgements / vii Introduction / ix
1. Sixty Years of the Republic / 1 2. Population — Labour — Employment / 29 3. The Transition to the 1980s 38 4. Economic Performance in the 1980s / 46 5. The International Sector / 71 6. The Inflationary Syndrome / 91 7. Turkey’s Economic Options / 124 8. Epilogue to the First and Prologue to the Second Quinquennium / 144 9. Postscript / 156
Bibliography / 162 Index / 169
Tables and Figures
Tables 3.1 Maximum deposit interest rates, 1975-85 / 39 4.1 Sectoral and GNP growth, 1978-85 / 65 4.2 Changes in the sectoral shares in GNP, 1970-85 / 65 5.1 Structure of exports and imports by main commodity groups, 1970-85 / 74 5.2 The balance of trade, current account and terms of trade, 1970-85 / 75 6.1 Indicators of inflation, 1970-85 / 102 6.2 Wholesale price indices, 1979-85 / 102 6.3 Inflationary rates and percentage changes in total and per capita GNP, 1970-85 / 104 7.1 Income distribution in Turkey — 1978-9 / 135 8.1 Resources and uses, 1985 and 1986 / 145 8.2 Sectoral distribution of investments in 1985 / 147 Cumulative table: select data on the economy of Turkey, 1970-85 / 154-155
Figures Map of Turkey / xii 5.1 Terms of trade, balance of trade, and balance on current account, 1970-85 / 79 6.1 Changes in GNP, in GNP per capita, and inflationary trends, 1970-85 / 105 6.2 Annual changes in money supply, exchange rates, and rates of inflation, 1970-85 / 113 6.3 Wholesale price indices in 1984 and 1985 / 117 7.1 Income distribution in Turkey — the Lorenz curve (end of the 1970s) / 135
PREFACE
The simplest excuse an author may give for re-examining a subject he himself already researched in the past is that his earlier publications are out of print and/or that with the passage of time data, analysis and lessons have become outdated in the face of new scenarios and new concepts. This undoubtedly holds true for the present author. This is not, however, the whole truth. The last few decades have witnessed a revolutionary change in the international political set-up, with tens of new independent polities, growing international, social and economic disparities, and domestic inequalities — all giving rise to diversified, sometimes conflicting development theories and strategies, drawing on such concepts as the theory of stages, dependencia, centre and periphery, 'trickling down’ theory, satisfaction of basic needs, countervailing power, new international economic order (NIEO), environmentalism versus nuclear power, and modernism versus fundamentalism. The list is endless.
Meanwhile, the stigma of grinding poverty in the midst of plenty still remains on both the international and national levels. The market mechanism has failed to wipe out this infamy, as well as others such as massive unemployment and inflationary distortions. Industrial, energy and financial oligopolies, furthermore, continue to guard vested interests.
‘Averages' of GNP per capita, the still-reigning criterion of economic and social welfare, have increased substantially, though unevenly, almost everywhere, but the ‘averages’ do little to reflect the realities. National and sectoral pockets of destitution have remained widespread, and new ‘social diseases’ have been added to the list of the traditional ones. Certain undeniable achievements notwithstanding, even the most sophisticated planning methods and models have been unable to meet all these challenges, and to catch up with the pressing needs of society and its development requirements and targets.
While our choice of Turkey as a representative case study of a developing country may appear somewhat arbitrary — and certain other economies could just as well have been selected — the social and economic history and present status of Turkey clearly reflect typically the case of a less developed country (LDC) which has attempted to overcome its inherited and acquired backwardness and the obstacles to development. Encouragement of free enterprise, ideology and techniques of etatism and planning, self-sufficiency (import substitution) and outward orientation, total outlay and radical restraints have all served as instruments of change and the striving towards economic independence at a high-level equilibrium.
It is not at all clear that goals have been achieved or that the most successful method or strategy of development has been employed, but the Turkish case undoubtedly reflects most of the issues, bottlenecks, political, social and economic impediments to growth, and the successes and failures of LDCs struggling for better opportunities and a greater share in international welfare. It raises time and again the issue of the very meaning of development as distinct from, though not contradicting, the notion of material growth. In this striving for development as representing the goal of decent human life and dignity lies the justification for our modest attempt to reconstruct the recent economic scenario as a link in the secular chain of change.
In my two earlier books on the subject, namely Turkey, an economy in transition (1958), and Turkey, the challenge of growth (1968), I dealt extensively with the development of the Turkish economy since the emergence of the Republic until the end of the 1960s. In the present volume, the whole period up to the late 1970s is telescoped into one major chapter, while the bulk of the work concentrates on the focal contemporary issues of the 1980s. During the critical years 1979 and 1980 the Turkish society was confronted with a host of complex transitory as well as long-term issues. Some of them can be understood and analysed only against the peculiar Turkish political and economic background, while others, such as inflation and disinflation, must be related to a wider conceptual theoretical and empirical framework, without forgetting, of course, the indigenous forces pertaining to the Turkish case. A follow-up of events and concepts in Turkey and their interactions with the international community renders possible an extrapolation of trends and the perception of desirable, planned and feasible future development.
Acknowledgements
This book, in common with my previous ones on the subject, may be considered an outcome of collective and cumulative thinking, discussions, agreements and disagreements, and continuous exchange of ideas with many friends and students, at conferences and seminars, and in private encounters. All of them have some share in the elaboration of concepts, issues and analysis, and their help is highly appreciated.
Particular thanks are due to my friend and colleague Professor Osman Okyar. who read the initial manuscript and offered extremely helpful comments, advice and ideas. He should be credited with many constructive revisions in the final version and, at the same time, exculpated from any sins committed by the author.
Further warm thanks go to my other friends and colleagues, Professor Miikerrem Hi? and Dr Cihat Iren for their admirable intellectual and professional assistance and inspiration.
I am deeply grateful to Gerda Kessler for her thorough English copy-editing and assistance in the preparation of the index, and to Pamela Yacobi and Sylvia Weinberg for their excellent typing. The Faculty of Social Sciences at Tel-Aviv University was helpful in the final stages of my work.
My greatest debt I owe as always to my wife.
Z.Y.H.
Introduction
Although Turkey’s economic policies have varied over the more than 60 years of the Republic and even strategies have undergone transformation, the country has retained a number of basic conceptual patterns. The misfortunes of the past, caused by domestic autocracy combined with corruption and inefficiency, and by growing foreign interference and dependency, were behind Ataturk’s determination to draw a definite line between the imperial past and a modern, republican, independent future. At the same time, however, all transformations of the Kemalist concept have remained faithful to the centrist notion of an indivisible entity, polity, and territory; they have been strongly nationalistic and, for the most part, authoritarian. In fact, decrees and laws, and even democratically phrased constitutions, have proved ineffective in eradicating the tradition of deeply rooted etatism, plausibly re-defined as a major indispensible tool of rapid development and progress, under the name of devletgilik. This basic notion has survived many political and economic upheavals, despite intermittent denials by politicians, economists and academics.
Other prevailing components of the evolving economic philosophy have been self-reliance, bordering upon autarky, rapid industrialisation, and the notion that has until recently pervaded economic policies of import substitution as a development strategy. In adopting these strategies, Turkey set a precedent for the new international economic order (NIEO) and most of the less developed countries (LDCs), though not the newly industrialising countries (NICs).
Geopolitical importance has always been a mixed blessing. In Turkey, too, the pros and cons of her geographical position have been unbalancing each other intermittently. An important element of this mixed blessing is the security aspect, which is part and parcel of every polity, but assumes particular dimensions in certain geopolitical conditions, such as those of Turkey. Although the military burden of the Turkish economy, which is officially estimated at about 5 per cent of the gross national product (GNP), apart from the direct NATO outlays, does not exceed significantly that of most developing countries and even lags behind some of them, as in other LDCs it combines with …
Z.Y. Hershlag
The Contemporary Turkish Economy
Routledge
Routledge The Contemporary Turkish Economy Z.Y. Hershlag
Routledge London and New York
First published in 1988 by Routledge a division of Routledge, Chapman and Hall 11 New Fetter Lane, London EC4P 4EE Published in the USA by Routledge a division of Routledge, Chapman and Hall, Inc. 29 West 35th Street, New York NY 10001
Printed and bound in Great Britain by Mackays of Chatham Ltd, Kent All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.
British Library Cataloguing in Publication Data ISBN 0-415-00388-1
Library of Congress Cataloging in Publication Data ISBN 0-415-00388-1
Routledge 11 New Fetter Lane London EC4P 4EE
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