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This is the translation of an article by Dr Yıldız Sertel first published in the Turkish quality daily, Cumhuriyet.
The article was, of course, translated by the Bridge.
How did we get here?
"Turkey needs to strengthen its economic infrastructure to get out of the crisis she is in. Turkey cannot get out of this crisis by borrowing on the international money markets to pay off her debts. She needs to draw from her own resources and strengths. Our country is relinquishing sovereignty in every area where international capital has gained acceptance. The state is destroying itself. Its spine and ribs are being removed one by one. There can be no such thing as separating politics from economic decisions. In that case who is going to make Turkey's own decisions? Turkey should look for resources to support agriculture and small business." (Cumhuriyet, May 13 2001).
These are the words of Zekeriya Temizel, the former chairman of the Banking Regulation and Supervisory Board. Sadly, we are experiencing a crisis of severe dimensions. Instead of looking for a solution, political and economic decision-makers are surrendering further to the IMF and the World Bank and are bankrupting the economy. These decision-makers are turning the independent republic, founded in 1923, into a classic example of a satellite state. They are making the majority of the population pick up the hefty bill that comes with living on credit. Before we can even address the question of whether there is a way out, we have to understand how we got here.
Transition into the policy of liberal dependency
The Republic of Turkey stood on a statist and protectionist platform until the end of the Second World War. Mustafa Kemal (Atatürk) had said: "We will rely on our own strength for our development. If need be, we can borrow as well - but never under conditions of slavery." (Izmir Economic Congress, 1923). The government used this policy of a planned and guided mixed economy to support private enterprise by means of the loans it supplied and the infrastructure it set up. This policy laid the foundations for the transition from an agricultural economy to industrial production. The state protected emerging industries from external competition and imperialist interventions. Starting out with virtually no industry at all, the number of industrial establishments had reached 1,087 by 1933. Of these, 85% were light industrial and 15% heavy-industrial establishments. In 1945, Turkey's trade surplus was TL 93 m. Not only had the Ottoman loans been paid off, no significant further loans had been taken out and the value of the Turkish currency had been preserved. On the global platform; our state enjoyed prestige, just as our currency had value. As a nation that fought a war of independence under Atatürk's leadership, and as an independent, developing nation, we were held up as a role model for those countries weighed down under the yoke of imperialism.
What did the transition bring?
After coming to power in 1950, the Democrat Party moved towards a development policy based on 'foreign aid', and in particular American 'aid'. Thirty years of liberalism produced economic growth that was industrially and financially dependent on global capital. Not only did this type of 'development' create a severe economic crisis, but also paved the way for the emergence of an 'underground economy'. Foreign exchange, drugs, and arms smuggling reached international proportions. The underground economy forged relationships with international organized crime. Bribery at ministerial levels, tax evasion, and illegal transactions within commercial agreements were all now considered to be part of daily life. Because of this, the word 'crisis' does not suffice to describe the social and economic degeneration witnessed since the 1950's. We are talking about a 'collapse' unfolding through a number of stages.
When capitalism began to reshape agriculture in the 1950's, the result was a loss of land for the rural population. Mechanization of agriculture resulted in less need of manual labor while primitive methods of agriculture caused the soil to become infertile. The combined effect of these changes was to initiate mass migration from rural areas to cities. In addition to bringing about a change to the social structure, this development was also the cause of a crisis. This phenomenon in which changes to the class structure are combined with uncontrolled urbanization is known as a structural crisis.
The stalling of growth
Industrialization in the 1960's was entirely dependent on external support, and this caused growth to stall. This industrialization depended on internal and external loans for its investments and importing everything from machinery, through spare parts, to raw materials. It bought patents from abroad. Many of these industries that were jointly formed with foreign and domestic capital were assembly industries. The result was an industrial structure that was dependent on imports. Consequentially, not only did industrialization fail to promote development, it actually caused an outflow of capital. This industrialization that completely eroded foreign exchange reserves increased dependency on the developed world. It wreaked havoc on the trade balance and the balance of payments. Turkey had to raise funds on international money markets at ever increasing rates of interest.
Degenerate capitalist development
This industrialization based not on the accumulation of capital but on the unearned income generated by excessive interest rates amounted to a kind of 'degenerate capitalist development'. This unbridled capitalism functioned under the oppressive terms and conditions of the IMF and the World Bank. The successive devaluations recommended by these bodies resulted in increased prices for imported goods which, in turn, inflated industrial costs and prices. Thus began an era of industrialization that fanned the flames of inflation. At the same time, excessive imports acted as a drain on foreign exchange reserves, which over time had the effect of bringing industrial production to a standstill, reducing output, and even causing stagnation. All of which brought about a high rate of unemployment.
Dependent transition to capitalism based on unearned income
A portion of the loans secured from the World Bank were earmarked for the mechanization of rural areas. These loans - referred to as 'export credits' by the World Bank - were used to purchase tractors from the American firm Caterpillar. Some of these tractors could not be used for want of spare parts and ended up rotting away in tractor graveyards. This kind of industrialization and mechanization did nothing to promote economic growth. The debt burden was rising and a foreign currency crunch, inflation, and unemployment were all being experienced at the same time.
In our country, capitalism had now recreated itself in our image. The nineteenth century transition to capitalism in Western countries was made possible by the accumulation of capital that spawned from mechanization. In Turkey, however, the transition to capitalism took place without any accumulation of capital. Investments were financed not by the accumulated capital from production, but with loans and money printed by the Central Bank. The development of capitalism in agriculture and industry was based upon these rocky foundations. As early as 1953, shortages of finance and raw materials for investment began to pose difficulties. Creditor nations had already begun requesting repayment of existing debts. Since the point had been reached where industry could no longer import the materials it required, it began to operate below capacity way back in 1955. According to a report by the State Planning Organization, industrial operating capacity for 1963 was 60% (a statement from Kemal Kurdas, the Minister of Economy at the time, Vatan, March 24 1964).
External sources
The decade between 1950 and 1960 was a period of development driven by foreign loans and cash injections that were known as the Marshall Plan and the Truman Doctrine. As indicated in Senator Gruening's report to the US Congress, 68.8% of American 'aid' provided for the export of goods to Turkey. 19.8% of this aid consisted of exported grain to Turkey. Following Turkey's entry into NATO in 1951, the exportation of military goods came to comprise a significant portion of American 'aid' (Senator Gruening's report to the US Congress, Cumhuriyet, October 1, 1963.) Long term investments that would provide capital accumulation were not made. Private sector investments were made in light industries such as textiles and chemicals that offered the prospect of short-term profits. The allocated budget for investments never exceeded 15% of national income. Industry was not only unable to absorb the unemployed masses migrating to the cities from rural areas, but was also laying off large numbers of workers. Neither the state, nor the companies formed by domestic and foreign capital were able to produce an adequate rate of development. Nonetheless, this weak industry consumed 56% of Turkish imports in 1960 due to its purchase of machinery and other materials from abroad. The trade gap, which had reached $ 149 m by this date, henceforth continued to rise every year.