1. POLITICAL ECONOMY OF TURKEY

2. The periods are determined according to the dates of the major economic and political milestones. The focus is on political and economical consequences of these crises and policy shifts caused by them. PeriodPolicy Phase 1923-1949Single party era; postwar recovery, etatism and second world war 1950-1959Liberalization and agriculture- based integration to the world economy 1960-1979The neo-etatist era; import- substituting industrialization and natural developmentalism under five year plans 1980-2001Neo-liberal restructuring and deregulation in the age of Washington consensus; liberalization and integration into the world economy 2002 and beyondRegulatory neo-liberalism in the age of post-Washington consensus; the growing power of independent regulatory agencies

3. 1923-1949 1923-1929, Postwar recovery Agriculture dominated production Industrialization, based on private entrepreneurship Government intervention whenever necessary Open economy 1930-1938, The Great Depression and Etatism Protectionist-etatist era Implementation of ISI policies Control over monetary policy and balanced budget First five-year plan The effect of the Great Depression on the prices of agricultural goods was bigger and lasted longer than the effect on the prices of non-agricultural goods, hence the external terms of trade of Turkey deteriorated. The government reacted to this situation by obtaining greater control over foreign trade and production mechanisms.

4. 1939-1945, Second World War Decrease in labor force and production Extensive government intervention Generation of funds through new taxes 1946-1949, Liberalization of economy Removal of trade restrictions Devaluation of TL Huge amount of foreign funds and government credits Involvement in the Truman Doctrine and OECD 1923-1949

5. Effects of Great Depression and WWII

6. 1950-1960 1) 1950-1954 2) 1954-1960

7. 1949-1951 TRUMAN DOCTRINE & MARSHALL PLAN The official mission statement: To give a boost to the Europe economy, to promote European production, to bolster European currency, and to facilitate international trade, especially with the United States, whose economic interest required Europe to become wealthy enough to import U.S. goods The unofficial goal: The containment of growing Soviet influence in Europe, evident especially in the growing strength of communist parties in Czechoslovakia, France, and Italy. A landmark in the Turkish economics and politics

8. 1949-1951 TRUMAN DOCTRINE & MARSHALL PLAN Conditions laid down to make use of the plan: ×Public Entreprenurship Private Entrepreneurship ×Heavy Industry (iron-steel, heavy chemical etc.) Industrialization based on agricultural products Highway construction

9. 1946-1950 A landmark in the Turkish economics and politics TRUMAN DOCTRINE & MARSHALL PLAN The devaluation of 1958 was followed by 1960 military coup Source: The Marshall Plan Fifty Years Later, Palgrave MacMillan, United Kingdom, 2001

10. Source: Economic and Social Indicators 1950-2014

11. No Value Added Products exported (Agricultural and Raw Products only) Source: Economic and Social Indicators 1950-2014

12. 1954-1960 BOP Deficits, Import Dependency, Slowing Rates of Growth, Interventionism and Authoritarianism Disguised ISI Period, IMF Agreements and the Coup -Frustration of International Accounts, Less FDI and Exports -Restrictions on Trade -Using fiscal, monetary tools to keep its popular support -Inflation rise (almost 100 % between 1955 and 1959) -1958 IMF Agreement  Devaluation and withdrawal of restrictions -Authoritarian policies culminates in military coup in 1960 Increase in Ms(%) 19529.62620 195316.53429 19543.14311 195531.55062 195629.25885 195726.67849 19583.68737 195911.59511 196012.39640 Bank credits

13. Decreasing Volume of both Exports and Imports Source: Economic and Social Indicators 1950-2014

14. Increasing Number of Manufacturing due to disguised ISI-period after ‘54 Source: Economic and Social Indicators 1950-2014

15. 1960-1980 Military Coup & Shift in Economic Policy Poor growth performance after a postwar expansion of 46-53 period Fiscal and BOP crisis towards the end of 50s. IMF stabilization program The success of the previous “planning based programs” Unsustainable liberalization of 50s Key Words Import Substitution Industrialization State Planning Organization Five-Year Plans Coalition Governments State Economic Enterprises 1960 Military Coup ISI & SPO The devaluation of 1958 was followed by 1960 military coup

16. 1960-1980 61-65, Coalition governments under İsmet İnönü First five-year plan 65-71, Justice Party Reasonably good growth but not sustainable Targets other than growth were ignored: saving, employment etc. 1970-devaluation of the Turkish Lira The devaluation of 1970 was followed by 1971 semi-coup 1971 Military Intervention 1971 semi-coup occurred while there were no deep economic crisis (compared to end of 50s), highlighting the fragile relationship between the economics and the politics in Turkey.

17. 1960-1980 1973-1980, Coalition Governments Short duration of governments & parliamentary chaos Weak performance, low growth, rising instability More complex phases of ISI & deepening crisis of the ISI model Development plans were ignored Oil crisis in 1973 & 1979 The emerge of the informal economy The economic & political instability of coalition governments was followed by 1980 military coup 1980 Military Coup Compared to single-party governments, coalitions have difficulties to ensure political stability & thus long-term economic growth. But, the problem lies not with coalition governments per se but with the quality of democracy in Turkey.

20. 1980-2000 January 24 Decisions September 12 Coup November 1982 => Constitution! 1983 => New Elections Washington Consensus, 1989 Political instability Crisis in 1994 Coalitions until 2002 “…..24 Ocak kararlarını destekleyen TÜSİAD Üyesi Rahmi Koç, Odalar Birliği Başkanı İbrahim Bodur gibi ünlü iş adamları gazetelere 24 Ocak kararlarının yıldönümü vesilesiyle vermiş oldukları demeçlerinde 12 Eylül darbesi olmasaydı 24 Ocak kararlarının yaşama geçirilemeyeceğini açık açık dile getirmişlerdir.” Political power over economic policy

23. 2002-Present 2002,Derviş Reforms Floating Exchange Rate Regime Reducing the uncertainty in the Banking Sector Stabilizing the currency and interest rates Balancing the macroeconomic equilibrium and installing proper atmosphere to induce growth AKP Government Even though Kemal Derviş has been impeached as an economic hit man by most of the nationalist/conservative politicians, his policies consist the infrastructure of the long lasting stability of Turkish Economy.

25. 2002-Present 2002-2009, Golden Age of AKP Single-digit level inflation Global liquidity environment High growth rates and increased purchasing power Increased social expenditures Huge privatizations Financial Crisis After long years of financial instability and unending cycle of crises, an era of expansion has begun. Also foreign capital inflow has increased with the pro-western image of AKP government.

26. 2002-Present 2009-Present, Middle Income Trap Decrease in the growth rates Lack of Innovation High youth unemployment Protests and Corruption Crisis Depreciation of TL Syrian Civil War and Refugee Crisis Period of Instability After the Great Recession Turkish economy has lost its inability of performing high growth rates. Also, with the Gezi Protests, Corruption Crisis and several problems in the Foreign Policy image of the AKP government has changed in the world public opinion

27. 2002-Present Distribution of Wealth Anatolian Tigers Proportional Change in Public Spending Suspicious Privatizations Corruption and Bribery Scandals Seizure of Banks and Companies Appointments by Government in Private Companies Even though AKP Government considered as neoliberal by most of the leftists in Turkey and rest of the world