1. 1 II-Protectionist and Étatiste Industrialisation (1930-39) 1929-30: Interventionism and Protectionism 1929- After the foreign exchange crisis in 1929 took the control of transactions of foreign exchange 1929-Implementation of new and protectionist tariff system- protection rate increased to %45.7 (before %12.9) 1930 Foundation of the Central Bank 1930 Law for Protection of the Value of Turkish Currency (Türk Parası Kıymetini Koruma Kanunu)

2. 2 Policy Shift –Transition to Étatisme (1931) a-Internal and External dynamics of Policy Shift: External Dynamics - Great Depression and its effects on Turkish economy (foreign exchange crises, impoverishment of especially rural population) Internal dynamics 1- Ataturk’s observation of the situation through his inspection tours in the country in 1930 and 1931. (He saw hars conditions under which most of the populations were living and discontent of the population)

3. 3 2- The widespread enthusiasm of the Free Republican Party (an opposition party created by the regime in 1930) 3- Effect of Soviet Union, which had started its own first five year plan in 1927 and continued to grow succesfully in spite of the greatest depression of the world.  The Decision of The Government: A policy transformation and adopting a new economic strategy for development is required.  In 1931 at the congress of RPP étatisme was officially adopted as the new economic policy.

4. 4 b- 1931-32: Discussions about the meaning of étatisme What the term etatisme meant was never clearly defined. It was not a form of socialism: private ownership remained as the basis of economic life. Rather it meant that the state took over the responsibility for creating and running industries for which the private sector could not accumulate the neceassary capital.  É tatisme: State do what the private sector cannot do.

5. 5 Within the leadership there were two conflicting currents. One, led by Ismet Inonu (Prime Minister) saw étatisme as a permanent solution and as a preferable to liberal capitalism in the Turkish situation. The other, headed by Celal Bayar, the president of İş Bankası, saw it a transitory stage, necassary until Turkish industry could fend itself. The business circle was also in the same opinion with Bayar. Atatürk appointed Celal Bayar, instead of the Mustafa Şeref Özkan, as Ministery of Economic Affairs in İnönü’s cabinett in 1932 and the conflict was resolved.

6. 6 A major influence on the formulation of Turkish statist policies was the Soviet Union. In 1932 a Soviet delegation visited Turkey and drew up a report on the development of Turkish industry. It recommended concentrating on textiles, iron and steel, paper, cement, glass and chemicals. In 1933 The Soviet Union provided Turkey with an interest free development loan up to equivalent of 18 milyon $. They also agreed to extend technical assistance for the Five Year Industry Plans. The First Five-year Industrialization Plan was adopted in 1934 with the assistance of Soviet advisers.

7. 7 c-First Five Year Industrial Plan (1934-1938) -The plan was a list of 15 investment project (for the construction of 15 factories in various parts of the country) and a programme for training the requirred technical personnel -The emphasis was on textiles, fluor and sugar (Three Whites) and as well as intermediary goods such as copper, ceramics, chemicals and paper. -Under the five year plan two large holding companies were founded: the Sümerbank, responsible for industry, in 1933 and the Etibank, responsible for Mining, in 1935. Most state-owned economic enterprises were bought under the umbrella of these two holdings.

8. 8 Outside the Soviet Union, Turkey became one of the first countries to experiment with a planned economy, an experiment which was considered a success when the first plan ended in 1938. Much was accomplished during the First Industrialisation Plan period. An infrastructure was laid and the process of industrialization set in motion. Turkey was already producing many of the goods she had previously imported. At the end of the planning period Turkey not only was able to produce a variety of consumer goods but was even producing some intermediate goods.

9. 9 By the end of the decade, state economic enterprises had emerged as important and even leading producers in a number of key sectors, such as textiles, sugar, iron and steel, glassworks, cement and mining. The Second Five Year Industrial Plan, which has already prepared in 1936, was launched in 1939 but had to be abandoned because of the war. It was much more ambituous than the first and it goals were to exploit mines and create a mining industry, and electrify the country by building power stations throughout Anatolia. The Second World War has changed the priorities of Turkish Government and instead of industrialization war economy took the place.

10. 10 Macroeconomic Data of 1930-38 Period Year Gr.Rate Agr.gr.r. Ind.Gr.r. CPI Mon. Suply Trade deficit (%) (%) (%) (1923=100) (1924=100) (Mil.$) 1930 2.2 -3.9 12.7 109.3 145.0 +378.2 1931 8.7 14.3 14.2 103.4 139.3 +63.7 1932 -10.7 -28.8 17.8 100.7 136.5 +2075.5 1933 15.8 22.1 19.0 90.0 136.0 +3060.7 1934 6.0 2.7 13.8 88.6 138.8 +841.3 1935 -3.0 -6.1 -0.1 82.3 141.6 +1140.7 1936 23.2 54.1 -3.4 82.5 155.3 +4032.3 1937 1.5 -3.5 10.3 83.8 167.6 +3782.7 1938 9.5 5.4 15.7 83.5 191.3 -794.0 Year TL/Sterlin X/GNP M/GN -Average rate of growth of GDP: % 5.8 1930 126.9 9.62 9.37 -Average rate of growth of industry is % 10.3 1931 118.7 9.18 9.13 -The share of industry in GDP: 1932 90.8 8.64 7.34 1929: % 9.9; 1939: %18.3 1933 86.3 8.44 6.56 -Average rate of growth of agriculture is % 5.1 1934 78.4 7.62 7.18 1935 75.9 7.33 6.79 1936 76.9 6.96 5.47 1937 76.9 7.62 6.32 1938 75.8 7.64 7.90