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Turkey’s Economic Policy Changes

Turkey has experienced a series of shifts in policy since the 1920s, however almost all these changes have been as a result of crisis both financial and political. This brings into perspective the debate of which type of economic system is better as well as the role of the government in the economy. On the other hand, no government would be willing to see itself collapse and the authorities will do anything that is within their control to rescue the situation. Just like crises in other countries, there are many reasons why policy changes were delayed until the system collapsed:
Causes of the delay in policy shift
First, Turkey was a reactive state which means it did not make initiatives to develop the economy through policies, however it only responded to crisis. Reactive states are characterized by lack of state capacity especially transformative and developmental capacity. This refers to a situation whereby policy-making organs lack the ability to pursue adjustment strategies domestically, working together with economic entities that are organized to uplift and change the industrial economy (Weiss, p. 5). As a result such states highly depend on external factors and actors to provide an impetus for transformation of existing policy. Particularly because macroeconomic crisis will eventually take place and render the existing system useless, hence external actors are empowered to effect change.
Secondly, support by external actors of the 1960s and early 70s regime which recognized the state as a key driving force in economic and social transformation also caused a delay in policy shift. For instance the World Bank was increasingly supportive towards protection of infant industries as a temporary measure, in which it believed that it was away of promoting rapid industrialization and development. The US was also receptive to Turkey’s adoption of capitalism instead of communism in the light of Cold War era. As a result these external actors who would have piled pressure for regime change were reluctant and on the contrary provided support that prevented the necessary changes from being instituted (Kasaba, p. 282).
One other reason why the shift in policy never happened early in time was because the policies had culminated relatively in a lot of successes in terms of economic growth and structural changes between the year 1933 to 1977. This period was characterized by industrial entrepreneurship which resulted in national development, made possible by the significant and complimentary role played by both the state economic and private enterprises (Kasaba, p. 286).
There existed a coalition bloc of ISI and developmentalists that favored the policy regime that existed before the crisis. This coalition composed of rising industrialists who had changed from commercial landownership to industrial entrepreneurship during the late 1950s when protectionism was slowly creeping in. They also included some bureaucratic elite who had been marginalized during the previous regime of Menderes and hence they had regained their ground as a result of the military intervention. The constitutional change of 1961 was another key reason as organized labour benefited greatly through the expansion of social rights. As a result the thirst for change if any by workers was quenched (Öniş & Şenses, p.7)
Lessons to be learned on economic policy making based on this delay
There are numerous lessons that can be drawn from Turkish economic policy making in the post World War 2 on the basis of this delay and the resulting problems: First, Nations need to adopt pro-active state policies which refer to nations that have transformative and developmental ability, regulatory ability and redistributive ability that is being capable of building social cohesion. Success in economy is limited when a state adopts the strategy of self-enclosure and inward-orientation. However economies that are generally open , have adopted an outward-orientation process and have focused on capitalizing on export openings in the world market as well as set up strategies for long term foreign investment have to a great extent been able to generate high economic growth. Such economies include South Korea, Taiwan among others. Although reactive states do experience periods of economic boom such periods are short lived because they end with a crisis when the system can no longer hold the external pressures, hence this lowers the overall economic growth that had been made during the period before the crisis (Öniş & Şenses, p. 26-29)
There cannot be any single agent that is responsible for economic growth or policy change in any economy such as Turkey. Therefore, for any significant shift in policy there must have been a composition of different factors. These include external actors such as key international organizations for example the World Bank and powerful countries such the United States. Particularly the US influences development in other developing countries through their material incentives which are offered in condition that the recipient will make certain adjustments. In addition, as relations between the two countries continue the developing country ends up adopting ideas of development from the powerful country. On the other hand, international organizations such as the World Bank always offer financial support to countries but with conditions that the country makes certain structural adjustments. In light of these facts, developing countries are restricted to acceptable norms of these external actors and hence they cannot chart their economic path that will enable them to mature industrially (Yeldan, P. 19-20)
Crisis in an economy always indicates that there was delay in implementing necessary policy changes, as a result the existing system is rendered unsustainable and hence it collapses. As Turkey was reluctant to institute policy changes, whereby it opted for a prolonged import-substituting policy, other countries such as South Korea voluntarily transited to an export oriented policy. This change helped South Korea to realize great export performance which served as a basis for its hyper-growth experience enabling it to prosper rapidly compared to most of other developing economies. Therefore if Turkey had implemented export growth strategy voluntarily in the 1970s instead of a forced transition as a response to the crisis, its development performance would have relatively reached greater heights (Öniş & Şenses, p.11).
Crises always have a negative effect on the social and political environments of any state. Although crises can bring transformation in an economy that otherwise seem impossible, it is important to note that such crises come with costly consequences in human and social-political lives. When there is crisis the existing democratic regimes are overthrown and military rule that is repressive takes over. This means that all the economic and political gains that had been achieved mostly go down the drain. In addition, the weaker segments of the society tend to bear a larger burden of the transition, particularly because other segments have amassed wealth that cushions them from the shocks associated with such drastic changes. It is also evident that measures instituted as a response to such crisis tend to lead to another collapse in the long run, hence resulting in a cycle of crises. Precisely because the regime that takes power tend to do away with anything that is associated with the preceding regime. As a result, all the gains that had been made are stopped or destroyed and also such uncontrolled shifts results in exposure of vulnerability of the system (Yeldan, p. 13).
Shifts in policy need to be a step-by-step process that entails implementing strategies and acting on the resultant developments. It is clear that late industrialized countries which have high economic performance did not start their adjustments under free market conditions. The state was actively involved in industrialization as well as nurturing the private entrepreneurial class through industrial protection, as they were in the process of catching up with the developed economies. Therefore the state played a key role as the countries had weaknesses in its technological, educational and entrepreneurial abilities. As opposed to countries like Turkey that exercised extreme situations as far as government is concerned, the late industrialized countries ensured there was a balance between state organs and private business shifts over time. As a result private players were empowered and hence the economy climbed to maturity levels of industrialization (Eligur, p. 137-141).
This shows that the difference between the late industrialized countries and countries such as Turkey is in the nature as well as the quality of state intervention, which results in major differences in economic performance and level of development over a period of time. Reactive states such as Turkey tend to intervene by correcting market failures indirectly whereby they use market instruments to control market operation mechanism or directly by an extensive public enterprise. This therefore limits their goals whereby they cannot strategies on long-term policies that will see them have an export industry that is can equally capable to compete internationally. These states also tend to go along acceptable norms of operation as demanded by external actors, particularly because in times of crisis they depend on these actors to bail them out (Öniş & Şenses, p. 4)
It is evident that the major obstacle to Turkey’s economic development is the reactive perspective to the events that happen in the world economy. However it is also clear that such an economy can also experience significant development performance if it can improve its state capacity, brought about by influences from external actors. This includes improving all the arms of the state that is the developmental and transformative, the regulatory and the distributive arms. A change in policy is a gradual process that needs a state backed plan, therefore rather than the state taking a back seat in the economic development process it should be actively involved by monitoring the situation. However the nature and level of involvement should be to empower the private actors who in turn will drive the economy towards maturity of the industry.
It is also evident that external actors can be so instrumental in instituting policy shift in reactive states because such states mostly lack institutional capacity to initiate that change. However it is also comes out that such external actors are often driven by their interests and as result they always offer pre-conditional support mostly financial. This therefore calls for the state to be ready to go against the acceptable norms and voluntarily make policy shifts in time instead of waiting to be forced to change policies as a response to the crisis.

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