1. DEVELOPMENTS AND CHALLENGES IN THE TURKISH ECONOMY
Dr. Ali Burak Güven --- INTL 100

2. SOME FACTS & FIGURES Income GDP ~ US$ 700 Billion (17th in the world)
Sectoral composition of GDP:
10 % agriculture; 25 % industry; 65 % services
Annual Per Capita GDP ~ US$ 10,000 (middle-income)
Demographics
Population = 73.7 million
Urban = %76; Rural = 24 %
Social
Development
Human Development Index (HDI): (83rd —
medium/high)
Gini Coefficient ~ 0.40 (moderately unequal income
distribution)
Unemployment (2010) = 11 % (Urban = 13.2 %)
Overwhelming majority has access to public health care,
education, and social security

3. MAJOR POLICY PHASES
State-led industrialization under single-party authoritarianism
Liberalization and agriculture-based integration into the world economy followed by return to protectionism and state intervention
Inward-oriented national developmentalism and industrial planning with considerable gains, nonetheless ending in crisis
Neoliberalism I (de-regulatory; Washington Consensus); export-led growth, followed by reform fatigue and backpedalling leading to policy paralysis and crisis
2000-
Neoliberalism II (re-regulatory; Post-Washington Consensus); IMF and EU-inspired structural reforms facilitating deeper integration and fast growth

4. Foreign Capital-Dependent Growth
DISTINCT FEATURES (I)
Foreign Capital-Dependent Growth
Chronic trade deficits fuelling current account deficits (due to industrial profile)
Exacerbated by low savings and investment
Outcome: Growth dependent on foreign inflows = debt
Periodic balance of payments difficulties

5. DISTINCT FEATURES (II)
Crisis-Prone
Every major policy phase ended in crisis
1958: Balance of payments crisis
: Balance of payments crisis
: Banking + balance of payments crisis
Two typical outcomes:
Political Crises: Democratic breakdowns (coups in and 1980) and/or substantive political reshuffling (2002)
Exposure to international financial institutions (i.e. IMF programs) spearheading paradigm shifts in economic policy and institutional arrangements

6. DISTINCT FEATURES (III)
Distributive Coalitions
In a (variably) open polity, electoral success depends on broad-based, cross-class distributive coalitions bringing together elite and mass collective interests
Systemic (i.e. institutionalized) and acute (i.e. electoral) populist redistribution toward (a) peasants; (b) urban workers; (c) urban self-employed & informal sector
Center-right single-party majority governments better at the “distributive coalition” game due to their ability to effectively incorporate rural interests (center-periphery coalitions): DP in the 1950s; JP in the 1960s; JDP in the 2000s

7. CONTEMPORARY DYNAMICS (I)
Intense regulatory reforms in the post-2001 period under successive IMF and World Bank programs; includes banking, fiscal regime, agriculture, social security
Relatively fast and equitable growth in ; gains in poverty reduction despite high unemployment
Deeper integration with international (especially EU) markets; both imports and exports rose exponentially
Unprecedented financial stability; Turkish banking system relatively unaffected by the global financial crisis of , although real sector crisis could not be prevented
Continued dependence on foreign inflows; persistent external vulnerability

8. CONTEMPORARY DYNAMICS (II)
Industrial upgrading and competitiveness remains the key long-term developmental challenge
As part of a more assertive and independent foreign policy, efforts toward export market diversification and intensified economic linkages with the Middle East, Africa
The continued (yet accelerated) rise of conservative commercial and industrial groups (Anatolian Tigers; “green capital”), usually at the expense of the secular, Western-oriented, Istanbul-based industrial establishment
The JDP operating from a pro-business economic paradigm with selective incorporation of rural and urban mass interests through controlled populism