The Period of Etatism in Turkey

1. ThePeriod of Etatism in Turkey

3. http://www.youtube.com/watch?v=MHdmaFJ6W6M

5. http://www.youtube.com/watch?v=CXQiXPNvC7U

6. The failure of the policy implemented during 1920s which had given priority to the private sector has made it inevitable for the government to intervene in the economy. • Falls in the production and income levels in leading sectors of the economy. Domesticdevelopmentsandexternalfactorsthatpavedthewayfor a statisteconomicapproach:

7. “Shortage of foreign exchange” due to the decrease in exports to the countries facing depression. Constraints on the imports of intermediate goods and fall in the national production due to the shortage of foreign exchange. Increase in unemployment. A worldwide consensus about the necessity of government intervention to cope with the depression.

8. Common for money, credit and public finance: 1.Stable development until 1938. 2. Monetary expansion during World War II. Developments in thefields of money-creditandpublicfinance

9. Increase in money supply is less than the increase in national income between 1930 and 1939. • Since the upward move of the money supply is slower than that of the national income, a contractionary effect has taken place. • As a result , the wholesale price index (TEFE in Turkish) did not increased until the years of the war. Developments in the Money-CreditSystem

10. Increases in required reserves (“yasal karşılıklar” in Turkish) were used to control the money supply and inflation rates accordingly. However, during the war, increase in the money supply has surpassed the increase in the national income (which is opposite to the prewar period). Increases in inflation rate were observed as well. Excess supply of money was given as credits.

12. Source: Quantity of Money:Composition of Deposit Credit and Currency Budget Data:Minister of Finance Credits:Akgüç,Öztin,Developments of Banking in Republic Time Other Data:Bulutay,Tezel,Yıldırım

13. Etatism in industrialization. • Between 1933 and 1938 greatest part of the revenues was provided by indirect taxation and invested in industrial projects. • In this epoch, balanced budget has been adopted in principle which has led to a surplus in the budget. Developments in Public Finance

14. The share of indirect taxation in budget expenditures has decreased. The share of direct taxation increased by imposing taxes on wealth and land. Government revenues are spent as transfer expenditures rather than industrial investments.

15. Private capitalist groups emerged. • Domestic borrowing strategy followed during the years of war.

16. Creating a balance between public expenditures and income. • Creating a foreign trade surplus by imposing restrictions on imports. Aims of theStatistPolicy

17. The commencement of the statist policy dates back to 1934. • The main purposes of the plan: • Construction of an industrial production system based on agricultural production and natural resources. • Domestic production of imported goods. • Diminishing the physical distance between the sources of factors of production and the place of incorporation for the firms in the economy. Statist Industrialization Policy

18. The statist industrialization policy aimed to establish national industries for knitted clothes and textiles, mining products, paper products, and chemicals. • Statist industrialization program was conducted through relying mainly on indirect taxation which would not increase the domestic or foreign debt.

19. During the implementation of the statist policies the ratio of the farmed lands has increased. Interest rates for the bank loans given by the Ziraat Bank has decreased and transactions has been eased. “Toprak Mahsülleri Ofisi” was founded within this period. Agriculture

21. Source:Bulutay T.,Tezel Y.S. and Yıldırım,WPI Index, Minister of Trade and 5oth Year

22. MTA and Etibank were established in 1935. MTA was responsible for mechanical issues such as searching, mining and extracting the ores and/or training the miners or other personnel whereas Etibank was fulfilling certain financial tasks such as buying and selling of the mines. Besides, Etibank was given other crucial duties such as producing and distributing electricity which was then an irreplaceable source of energy. Though a considerable progress has been experienced in mining and energy sectors, some unfavorable factors such as low yield per worker due to lack of advanced technology and capital investments, deficiencies in processing the mines or raw materials, and high costs of producing electricity have deteriorated the positive picture. MiningandEnergy

23. Source:Bulutay,T.,Tezel,Y.S. Yıldırım,N

28. Source:TUIK,Bulutay,Tezel,Yıldırım

29. The basic characteristic of the manufacturing industry during that epoch is that it has focused primarily on the production of consumer goods. • The most prominent progress was seen in the sector for knitted clothes and textiles. • Substantial part of the mining and manufacturing industries has taken advantage of the “incentive law”. • In this era, iron and steel production plants have been constructed in Karabük, and cement production has increased. Industrial Structure

30. Considerable number of workplaces were centralized on the agricultural industries and textiles. Indicators like production per workplace or number of workers per workplace were in favor of the mining industry. However, forestry products, textiles and construction sectors have recorded the highest values when it comes to the share of labor. Similarly, mining products, paper products, chemicals, and constructing industry have given the highest share to the wages from the value added in comparison with the other industries. Mining, construction and other manufacturing industries have had the highest average values for “çevirici güç” per sector.

31. The main purpose was to prevent trade deficits. • While doing so, 1. Imports of the goods produced domestically have been restricted. 2. “Imports in return for exports policy” was adopted. Restrictions on imports have been relaxed this way. 3. Turkey’s sole trade deficit within the 1933-1945 period was seen in 1938. Foreign trade

32. 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 Line of Current Account Source:Foreign Trade Data:Minister of Trade and 50th Year,National Income:Bulutay,Tezel,Yıldırım

33. Rapid growth in national production has stemmed from the developments in the industrial structure. • National income has continued ceaselessly to grow during the years of war, except for 1945. National Production

35. A great deal of progress has been shown in literacy rate. • Villiage Institutes have been developed to improve the literacy rate and educate qualified labor. • A “labor law” has been enacted to regulate the labor hours in a week, thus women and small children 16 or under have been protected. . Social Developments

36. Source: Kepenek, Y. And N Yentürk. “Türkiye Ekonomisi”. Remzi Kitabevi. 21. Basım, 2008. (Chapter 4).